Question

The following information relates to Hampel Components Inc. Net Income $100,000 Preferred stock dividends $5,000 Average Common Stockholder's Equity $2,100,000 Dividend Per Common Share $1.50 Earnings Per Share $3.00 Market price per common share, year-end $30.00 Calculate the company's return on common stockholder's equity Select one:

Answer 1

Return on common stockholders' equity = Net income/Shareholders equity x 100

Return on common stockholders' equity = $100,000/$210,000 x 100

= 47.62%

Explanation: Return on common stockholders' equity is the ratio of net income to average common stockholders' equity. Net income is $100,000 while average common stockholders' equity is $210,000. The ratio of the two gives return on common stockholders' equity.