Question

Assume the following data for Cable Corporation and Multi-Media Inc. Cable Corporation Multi-Media Inc. Net income $ 30,700 $ 115,000 Sales 336,000 2,370,000 Total assets 485,000 919,000 Total debt 229,000 465,000 Stockholders' equity 256,000 454,000 a-1. Compute return on stockholders’ equity for both firms. (Input your answers as a percent rounded to 2 decimal places.)

Answer 1

Return on equity (ROE) for Firm A = 11.99%

Return on equity (ROE) for Firm B = 25.33%

Step-by-step explanation:

Return on equity (ROE) = net income by shareholders' equity

Return on equity (ROE) for Firm A

30,700/256,000 x 100= 11.99%

Return on equity (ROE) for Firm A

115,000/454,000x 100 = 25.33%