Common Stockholders' Profitability Analysis A company reports the following: Net income $120,000 Preferred dividends 4,800 Average stockholders' equity 1,016,949 Average common stockholders' equity 533,333 Determine (a) the return on stockholders' equity and (b) the return on common stockholders' equity. If required, round your answers to one decimal place. a. Return on Stockholders' Equity % b. Return on Common Stockholders' Equity 50 %
Common Stockholders' Profitability Analysis A company reports the following: Net income $120,000 Preferred dividends 4,800 Average stockholders' equity 1,016,949 Average common stockholders' equity 533,333 Determine (a) the return on stockholders' equity and (b) the return on common stockholders' equity. If required, round your answers to one decimal place. a. Return on Stockholders' Equity % b. Return on Common Stockholders' Equity 50 %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Common stockholders profitability analysis
![### Common Stockholders' Profitability Analysis
A company reports the following:
- **Net income:** $120,000
- **Preferred dividends:** $4,800
- **Average stockholders' equity:** $1,016,949
- **Average common stockholders' equity:** $533,333
---
Determine (a) the return on stockholders' equity and (b) the return on common stockholders' equity. If required, round your answers to one decimal place.
---
#### Calculations:
**a. Return on Stockholders' Equity**
\[ \text{Return on Stockholders' Equity} = \frac{\text{Net Income} - \text{Preferred Dividends}}{\text{Average Stockholders' Equity}} \times 100 \]
[Input Box] %
**b. Return on Common Stockholders' Equity**
\[ \text{Return on Common Stockholders' Equity} = \frac{\text{Net Income} - \text{Preferred Dividends}}{\text{Average Common Stockholders' Equity}} \times 100 \]
\[ \text{Return on Common Stockholders' Equity} = 50\% \] (This value is provided in the image)
[Input Box] %
---
Graph or Diagram Explanation:
In the provided image, there are input boxes for using the formulas above to calculate the rates of return. The input box for the first formula (a) is empty, implying that the user needs to calculate and fill it in, while the input box for the second formula (b) is prefilled with 50%. The image appears to be an interactive component from an online educational resource used for teaching financial analysis concepts.
---
_- [v2.cengagenow.com: An e-learning and learning resource from Cengage Learning]_](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0da0a9ed-480c-4a1e-9dd3-aae3fbebf8de%2F109c23be-2555-435c-8585-af5ce0345112%2Fp29he1_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Common Stockholders' Profitability Analysis
A company reports the following:
- **Net income:** $120,000
- **Preferred dividends:** $4,800
- **Average stockholders' equity:** $1,016,949
- **Average common stockholders' equity:** $533,333
---
Determine (a) the return on stockholders' equity and (b) the return on common stockholders' equity. If required, round your answers to one decimal place.
---
#### Calculations:
**a. Return on Stockholders' Equity**
\[ \text{Return on Stockholders' Equity} = \frac{\text{Net Income} - \text{Preferred Dividends}}{\text{Average Stockholders' Equity}} \times 100 \]
[Input Box] %
**b. Return on Common Stockholders' Equity**
\[ \text{Return on Common Stockholders' Equity} = \frac{\text{Net Income} - \text{Preferred Dividends}}{\text{Average Common Stockholders' Equity}} \times 100 \]
\[ \text{Return on Common Stockholders' Equity} = 50\% \] (This value is provided in the image)
[Input Box] %
---
Graph or Diagram Explanation:
In the provided image, there are input boxes for using the formulas above to calculate the rates of return. The input box for the first formula (a) is empty, implying that the user needs to calculate and fill it in, while the input box for the second formula (b) is prefilled with 50%. The image appears to be an interactive component from an online educational resource used for teaching financial analysis concepts.
---
_- [v2.cengagenow.com: An e-learning and learning resource from Cengage Learning]_
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