Question

Galaxy United, Inc. 2009

Income Statement ($ in millions)
Net sales $8,500
Less: Cost of goods sold 7,230
Less: Depreciation 410
Earnings before interest and taxes 860
Less: Interest paid 81
Taxable Income 779
Less: Taxes 273
Net income $506

Galaxy United, Inc.
2008 and 2009
Balance Sheets ($ in millions)
2008 2009
Cash $ 110 $ 150
Accounts payable $1,110 $1,130
Accounts rec. 950 780
Long-term debt 970 1,245
Inventory 1,480 1,520
Common stock $3,160 $2,960
Sub-total $2,540 $2,450
Retained earnings 530 735
Net fixed assets 3,230 3,620
Total assets $5,770 $6,070
Total liab. $5,770 $6,070

What is the return on equity for 2009?

Answer 1

13.69%

Step-by-step explanation:

Return on Equity = Net Income / Shareholder's Equity

All Computations are in millions

Shareholder's Equity = Common Stock + Retained Earnings

Shareholder's Equity = $2960 +$735

Shareholder's Equity = $3,695

Net Income = $506

Return on Equity = $506 / $3,695

Return on Equity = 13.69 %