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Business Accounting FINANCIAL ACCT-CONNECT

Return on equity is a profitability ratio. This ratio is calculated by dividing the net income by the equity or capital amount. The ratio indicates the percentage of net income earned over the amount of capital invested in the business. To calculate: the return on equity ratios for the partners and the firm. The return on equity ratios for the partners and the firm are as follows: Partner H Partner D Partnership Return on equity 16.7% 9.0% 14.3% The return on equity ratios for the partners and the firm are calculated as follows: Partner H Partner D Partnership Net income (A) $ 20,040 $ 4,950 $ 24,990 Beginning equity (B) $ 1,00,000 $ 50,000 $ 1,50,000 Ending equity (C) $ 1,40,000 $ 60,000 $ 2,00,000 Average equity (D) =(B+C)/2 $ 1,20,000 $ 55,000 $ 1,75,000 Return on equity (A/D) 16.7% 9.0% 14.3%

Return on equity is a profitability ratio. This ratio is calculated by dividing the net income by the equity or capital amount. The ratio indicates the percentage of net income earned over the amount of capital invested in the business. To calculate: the return on equity ratios for the partners and the firm. The return on equity ratios for the partners and the firm are as follows: Partner H Partner D Partnership Return on equity 16.7% 9.0% 14.3% The return on equity ratios for the partners and the firm are calculated as follows: Partner H Partner D Partnership Net income (A) $ 20,040 $ 4,950 $ 24,990 Beginning equity (B) $ 1,00,000 $ 50,000 $ 1,50,000 Ending equity (C) $ 1,40,000 $ 60,000 $ 2,00,000 Average equity (D) =(B+C)/2 $ 1,20,000 $ 55,000 $ 1,75,000 Return on equity (A/D) 16.7% 9.0% 14.3%

Solution Summary: The author explains that return on equity is a profitability ratio, calculated by dividing the net income by the equity or capital amount.

FINANCIAL ACCT-CONNECT

FINANCIAL ACCT-CONNECT

8th Edition

ISBN: 9781266627903

Author: Wild

Publisher: INTER MCG

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