Question

Fondren Machine Tools has total assets of $3,310,000 and current assets of $879,000. It turns over its fixed assets 3.6 times per year. Its return on sales is 4.8 percent. It has $1,750,000 of debt. What is its return on stockholders' equity?

a) 6.2%
b) 8.4%
c) 10.7%
d) 12.1%

Answer 1

The given financial data is not sufficient to accurately calculate the return on stockholders' equity for Fondren Machine Tools, as essential information such as net income and shareholders' equity or total liabilities is missing.

Step-by-step explanation:

The question asks to calculate the return on stockholders' equity for Fondren Machine Tools based on the provided financial information, which includes total assets, current assets, fixed asset turnover, return on sales, and the amount of debt. Return on stockholders' equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders' equity. Not enough financial data has been provided in the question to calculate net income or shareholders' equity directly. For a complete answer, we would also need to know the net income and either the total shareholders' equity or the total liabilities to calculate shareholders' equity. Since these are not provided, we would need to make assumptions or estimate those undetermined values, which has not been requested by the user. Therefore, we cannot accurately choose between the multiple-choice answers provided (a. 6.2%, b. 8.4%, c. 10.7%, d. 12.1%) based on the limited data available.