The Delicious Restaurant Corporation reported the following financials at the end of the current year:
Inventory and prepaid expenses account for $30,000 of the current year’s current assets. Average inventory for the current year is $36,250. Average net accounts receivable for the current year is $45,000. There are 35,000 shares of common stock outstanding. Total dividends paid during the current year were $17,000. The market price per share of common stock is $20.
What is the rate of return on common stockholders’ equity (ROE) for the current year?
a. 37.49%
b. 2.43%
c. 41.69%
d. 66.79%
e. None of the above
Using the basic formula for the return on equity, averaging total equity over the period,
ANSWER:
d. 66.79%