Question

On December​ 31, Mercury Corporation has the following data​ available:

Net Income $ 190,000
Interest expense 40,000
Total assets at the beginning of the year 800,000
Total assets at the end of the year 760,000
Total common​ stockholders' equity at the beginning of the year 530,000
Total common​ stockholders' equity at the end of the year 490,000
What is return on​ equity? (Round your final answer to two decimal​ places, X.XX%)

Answer 1

37.25%

Step-by-step explanation:

Average total common stockholders' equity:

= (Beginning common​ stockholders' equity + Ending common​ stockholders' equity) ÷ 2

= ($530,000 + $490,000) ÷ 2

= $510,000

Return on Equity = Net income ÷ Average total common stockholders' equity

= $190,000 ÷ $510,000

= 0.3725

= 37.25%