Sheffield Corp. had net income of $163625 and paid dividends of $48500 to common stockholders and...

Sheffield Corp. had net income of $163625 and paid dividends of $48500 to common stockholders and $16500 to preferred stockholders in 2020. Sheffield Corp.’s common stockholders’ equity at the beginning and end of 2020 was $890000 and $1250000, respectively. Sheffield Corp.’s return on common stockholders’ equity was

13.75%.

10.75%.

9.75%.

15.75%.

Expert Solution

Correct Option A i.e. 13.75%

Return on Equity = Net Income to common stockholder/ Average Equity
= 147125 / 1070000
13.75%


Net Income to common stockholder

Net Income	163,625
Less: Dividend to preference stockholder	(16,500)

Net Income to common stockholder	147,125


Average Equity =( Beginning Equity + Ending Equity )/2
=(890000 + 1250000)/2
1,070,000

ekkarill92 answered 3 years ago

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