Question

A firm with sales of​ $1,000,000, net profits after taxes of​$30,000, total assets of​ $1,500,000, and common​ stockholders' investment of​ $750,000 has a return on equity of​ ________. A. 3 percent B. 15 percent C. 20 percent D. 4 percent

Answer 1

Answer:

The firm has a return on equity of​ D. 4 percent

Explanation:

Return on equity (ROE) helps an investor see how much after-tax profit a company gained for each dollar in equity, is calculated by formula:

Return on equity (ROE) = Net income/shareholder's equity

The firm has  net profits after taxes of​ $30,000 and common​ stockholders' investment of​ $750,000 - shareholder's equity.

ROE = ($30,000/$750,000) x 100% = 4.00%