Stockholder Profitability RatiosThe following information pertains to Montague Corporation:Net income$60,000Average common equity$1,500,000Preferred dividends$7,500Average common shares outstanding100,000Required:Calculate the return on common equity and the earnings per share. Round your answers to two decimal places.Return on common equityfill in the blank 1%Earnings per share$fill in the blank 2per share

Return on Common Equity It calculated how much income does a company generate from the amount invested by its common stock equity shareholders. Formula Given Information Net Income is $60,000 Average Common Equity of $ 1,500,000 Preferred Dividends of $ 7,500. Calculation = ( $ 60,000 - $ 7,500 ) / $1,500,000 = 3.50% * for converting number into percentage multiply the derived number by 100. here 0.035 x 100 = 3.50 % Interpretation Montague Corporations earns 3.50% of net income from amount invested by common shareholders.Earnings Per Share Earnings Per Share indicated the dollar amount per share available to common stock shareholder from net income of the company. Formula Given Information Net Income is $60,000 Average Common Shares Outstanding are 100,000 Preferred Dividends of $ 7,500. Calculation Earning Per Share = ( $ 60,000 - $ 7,500 ) / 100,000 = $ 0.53 per share * $0,525 rounded to 2 decimals Interpretation Common Stock Shareholders of Montague Corporation received $ 0.53 per share from net income.

Answered: Stockholder Profitability Ratios The…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Stockholder Profitability Ratios

The following information pertains to Montague Corporation:

Net income	$60,000
Average common equity	$1,500,000
Preferred dividends	$7,500
Average common shares outstanding	100,000

Required:

Calculate the return on common equity and the earnings per share. Round your answers to two decimal places.

Return on common equity	fill in the blank 1	%
Earnings per share	$fill in the blank 2	per share

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