Chapter 18, Problem 18.24E

Profitability ratio

• LO18–1

Comparative balance sheets for Softech Canvas Goods for 2018 and 2017 are shown below. Softech pays no dividends and instead reinvests all earnings for future growth.

Liabilities and Shareholders’ Equity:

Current liabilities	$ 240	$210
Bonds payable	160	160
Paid-in capital	400	400
Retained earnings	200	120
	$1,000	$890

Required:

1. Determine the return on shareholders’ equity for 2018.

2. What does the ratio measure?