Chapter 9, Problem 15CDQ

To determine

Concept Introduction:

Dividend Yield Ratio:

Dividend Yield ratio is calculated as percentage by dividing the Dividend per share by Market price per share. The formula for the Dividend Yield ratio is as follow:

  $DividendYieldRatio=\frac{Dividendpershare}{Marketpricepershare}$

Return on Equity:

Return on Equity is the rate of return earned by the Stockholders on their investment in the company. It is calculated with the help of following formula:

  $\mathrm{Re}turnonEquity=\frac{NetIncome}{AverageStockholder’sEquity}$

The Average stock holder's equity calculated with the help of following formula:

  $Averagestockholder’sequity=\frac{( Beginningstockholder’sequity+Endingstockholder’sequity)}{2}$

To Indicate:

The Difference between the dividend yield and return on common stockholder's equity