Rio Imports Information from the financial statements are provided below: 2020 2
ID: 2548129 • Letter: R
Question
Rio Imports
Information from the financial statements are provided below:
2020
2019
Current Liabilities
$460,000
$320,000
Long-Term Liabilities
240,000
640,000
Stockholders' Equity
840,000
1,080,000
Net Cash Flows from Operating Activities
160,000
102,000
Interest and Principal Payments
24,000
16,000
Net Sales
950,000
900,000
Net Income
180,000
144,000
Interest Expense
17,000
23,000
Income Taxes
32,000
29,000
Dividends Paid to Common Stockholders
30,000
60,000
Refer to Rio Imports. Return on equity for 2020 is
a.
23.85%.
b.
27.26%.
c.
18.75%.
d.
21.43%.
2020
2019
Current Liabilities
$460,000
$320,000
Long-Term Liabilities
240,000
640,000
Stockholders' Equity
840,000
1,080,000
Net Cash Flows from Operating Activities
160,000
102,000
Interest and Principal Payments
24,000
16,000
Net Sales
950,000
900,000
Net Income
180,000
144,000
Interest Expense
17,000
23,000
Income Taxes
32,000
29,000
Dividends Paid to Common Stockholders
30,000
60,000
Explanation / Answer
Return on equity = Net income*100/Average equity
Average equity = (840000+1080000/2) = 960000
Return on equity = 180000*100/960000 = 18.75%
so answer is c) 18.75%
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