Question

se the following information to answer this question. Windswept, Inc. 2017 Income Statement ($ in millions) Net sales $ 8,600 Cost of goods sold 7,290 Depreciation 400 Earnings before interest and taxes $ 910 Interest paid 80 Taxable income $ 830 Taxes 291 Net income $ 539 Windswept, Inc. 2016 and 2017 Balance Sheets ($ in millions) 2016 2017 2016 2017 Cash $ 140 $ 175 Accounts payable $ 1,150 $ 1,205 Accounts rec. 900 700 Long-term debt 990 1,255 Inventory 1,500 1,535 Common stock 3,190 2,890 Total $ 2,540 $ 2,410 Retained earnings 450 700 Net fixed assets 3,240 3,640 Total assets $ 5,780 $ 6,050 Total liab. & equity $ 5,780 $ 6,050 What is the return on equity for 2017? Multiple Choice 17.73% 18.65% 25.35% 15.01% 31.49% Next Visit question mapQuestion 1 of 16 Total1 of 16 Prev

Answer 1

15.01%

Step-by-step explanation:

The computation of the return on equity for the year 2017 is shown below:

Return on Equity is

= Net Income ÷ Total Equity

where,

net income is $539 million

And, the total equity is

= Common stock + retained earnings

= $2,890 + $700

= $3,590 million

So, the return on equity is

= $539 million ÷ $3,590 million

= 15.01%