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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Twenty metrics of liquidity, solvency, and profitability

The comparative financial statements of Automotive Solutions Inc. are as follows. The market price of Automotive Solutions Inc. common stock was $119.70 on December 31, 20Y8


Instructions

Return on stockholders’ equity

To determine

Concept Introduction:

Return on Equity:

Return on Equity is the rate of return earned by Stockholders on investment in a 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:

    20Y8
    Net Income (A) $ 900,000
    Beginning Stockholder's Equity (B) $ 6,375,000

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