Excerpts from Lasso Corporation\'s most recent balance sheet appear below: 560,0

Question

Excerpts from Lasso Corporation's most recent balance sheet appear below:
    

560,000

490,000

$1,566,000

$1,496,000

  
Net income for Year 2 was $161,000. Dividends on common stock were $63,000 in total and dividends on preferred stock were $28,000 in total. The return on common stockholders' equity for Year 2 is closest to:

Year 2 Year 1   Preferred stock $180,000 $180,000   Common stock 560,000 560,000   Additional paid-in capital--common stock 266,000 266,000   Retained earnings

560,000

490,000

  Total stockholder's equity

$1,566,000

$1,496,000

Explanation / Answer

Common equity = Total Equity Preferred Stock

The return on common stockholders' equity for Year 2 is closest to:=net income-preffered dividends/Common equity=161,000-28,000/560,000+266,000=133,000/826,000=0.161~16.1%

Return on Common Equity = Net Income Preferred Dividends Average Common Equity

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