Question

Use the following information to answer this question. Windswept, Inc. 2017 Income Statement ($ in millions)Net sales $ 9,200 Cost of goods sold 7,550 Depreciation 430 Earnings before interest and taxes $ 1,220 Interest paid 92 Taxable income $ 1,128 Taxes 395 Net income $ 733 Windswept, Inc. 2016 and 2017 Balance Sheets ($ in millions) 2016 2017 2016 2017 Cash $ 200 $ 235 Accounts payable $ 1,370 $ 1,505 Accounts rec. 950 850 Long-term debt 1,050 1,315 Inventory 1,620 1,625 Common stock 3,200 2,950 Total $ 2,770 $ 2,710 Retained earnings 510 760 Net fixed assets 3,360 3,820 Total assets $ 6,130 $ 6,530 Total liab. & equity $ 6,130 $ 6,530 What is the return on equity for 2017?

Answer 1

The return on equity for Windswept, Inc. for the year 2017 is calculated to be 19.75%, using the net income of $733 million and the shareholder's equity of $3,710 million.

Step-by-step explanation:

The question is asking to calculate the return on equity (ROE) for Windswept, Inc. for the year 2017. To calculate ROE, we use the formula: ROE = Net Income / Shareholder's Equity. From the provided information, the net income for 2017 is $733 million. For the shareholder's equity, we subtract total liabilities from total assets for the year 2017, which is the sum of common stock and retained earnings ($2,950 million + $760 million = $3,710 million). Thus, the ROE for Windswept, Inc. in 2017 is calculated as $733 million / $3,710 million = 0.1975, or 19.75%.

Answer 2

19.76%

Step-by-step explanation:

The computation of the return on equity is shown below:

Return on equity = net income ÷ total stockholder equity

where,

Net income is $733

And, the total stockholder equity is

= Common stock + retained earning

= $2,950 + $760

= $3,710

So, the return on equity is

= $733 ÷ $3,710

= 19.76%

We simply applied the above formula