27th Edition
WARREN + 5 others
ISBN: 9781337272094




27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Common stockholders’ profitability analysis

A company reports the following:

Net income $ 375,000
Preferred dividends 75,000
Average stockholders’ equity 2,500,000
Average common stockholders’ equity 1,875,000

Determine (a) the return on stockholders’ equity and (b) the return on common stockholders’ equity. Round percentages to one decimal place.

To determine

Evaluation of profitability: In general, financial ratios are used to evaluate capabilities, profitability, and overall performance of a company. The following are the ratios that evaluate the profitability of a company:

  • Profit margin ratio
  • Rate of return on total assets
  • Asset turnover ratio
  • Rate of return on common stockholders’ equity
  • Earnings per share
  • Dividend payout

To determine: Return on stockholders’ equity.

Given info:   Net income, preference dividends, average stockholders’ equity and average common stockholders’ equity.


Rate of return on stockholders’ equity is used to determine the relationship between the net income and the average common equity that are invested in the company.

Formula: Rate of re


To determine
Return on common stockholders’ equity

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What is a relation? What is a tuple?

Accounting Information Systems

What is a plan? Differentiate between the major types of plans.

Foundations of Business (MindTap Course List)

Why do bond discounts and bond premiums arise at the time of sale?

Intermediate Accounting: Reporting And Analysis

List the three steps followed under the gross profit method of estimating inventory.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

CONSTANT GROWTH VALUATION Thomas Brothers is expected to pay a 0.50 per share dividend at the end of the year (...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)