Question

Company X has net sales revenue of $1,259,000, cost of goods sold of $776,500, and all other expenses of $301,000. The beginning balance of stockholders' equity is $510,000 and the beginning balance of fixed assets is $372,000. The ending balance of stockholders' equity is $875,000 and the ending balance of fixed assets is $400,000. Required: Compute the return on equity (ROE) ratio.

Answer 1

The answer is 0,5739.

Step-by-step explanation:

If we subtract the cost of goods and other expenses from the net sales revenue, we get $181,500.

The balance of fixed assets at the end is $400,000 and the stockholders' equity is $875,000.

The difference in the balance of fixed assets is $28,000 and the difference in the stockholders' equity is $365,000.

So the return on equity ratio can be computed as follows;

(181,500+28,000) / 365,000 = 0,5739.

I hope this answer helps.