Question

Income statement: 20X2 Sales $2,500,000 Cost of goods sold $1,300,000 Net income $200,000

Balance sheets: 2018
a) Accounts receivable $300,000
b) Total assets $2,000,000
c) Total shareholders' equity $900,000
20X1
a) Accounts receivable $200,000
b) Total assets $1,800,000
c) Total shareholders' equity $700,000
The return on shareholders' equity for 20X2 is:

Answer 1

The return on shareholders' equity for 20X2 is 22.2%.

Step-by-step explanation:

The return on shareholders' equity for 20X2 can be calculated using the formula:

Return on Shareholders' Equity = Net Income ÷ Shareholders' Equity

In this case, the net income for 20X2 is $200,000 and the shareholders' equity is $900,000. Therefore, the return on shareholders' equity for 20X2 is:

Return on Shareholders' Equity = $200,000 ÷ $900,000 = 0.222 or 22.2%