In: Accounting
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%.
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 | ||