Question
Asked Nov 5, 2019
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Q. question 8

The financial statements of Heatwave Athletic Wear include the following selected data ($ in millions): Sales, $22,400; Net income,
$775; Beginning stockholders' equity, $3,590; Ending stockholders' equity, $4,170.
Calculate the return on equity. (Round your answer to 1 decimal place.)
Return on equity
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The financial statements of Heatwave Athletic Wear include the following selected data ($ in millions): Sales, $22,400; Net income, $775; Beginning stockholders' equity, $3,590; Ending stockholders' equity, $4,170. Calculate the return on equity. (Round your answer to 1 decimal place.) Return on equity

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Expert Answer

Step 1

Return on equity (ROE): This financial ratio evaluates a company’s efficiency in using stockholders’ equity to generate net income. So, ROE is a tool used to measure the performance of a company.

Step 2

Calculate the return on equity:

 

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Net income Return on equity Average shareholders' equity $775 $3,880 19.97%

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Step 3

Workings:

 Compute the average stockholder’s e...

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Ending stockholder's equity +Opening stockhol der's equity Average Stockholder's Equity 2 ($4,170 $3,590) $7.760 2 - $3,880

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