   Chapter 15, Problem 15.5.2MBA

Chapter
Section
Textbook Problem

Financial leverageCostco Wholesale Corporation (COST) and Wel-Mart Stroes Inc. (WMT)reported the following data (in milllions) for a recent year: Compute the return on stockholders equity. Round to one decimal place.

To determine

Concept Introduction:

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:

Return on Equity = Net IncomeAverage Stockholders Equity

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

Average stock holders equity=( Beginning stock holders equity + Ending stock holders equity)2

To Calculate:

The Return on Stockholder's equity

Explanation

The Return on Stockholder's equity is calculated as follows:

 $in Millions Costco Wal-Mart Operating Income (A)$ 2,377

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