Table 4-3 Lesli Corporation Balance Sheet Income Statement Assets: Cash $150,000
ID: 2665204 • Letter: T
Question
Table 4-3Lesli Corporation
Balance Sheet Income Statement
Assets:
Cash $150,000 Sales (all credit) $6,000,000
Accounts receivable 350,000 Cost of goods sold (3,000,000)
Inventory 600,000 Operating expenses (900,000)
Net fi xed assets 1,900,000 Interest expense (750,000)
Total assets 3,000,000 Income taxes (500,000)
Net income 850,000
Liabilities and owners’ equity:
Accounts payable $150,000
Notes payable 250,000
Long-term debt 1,200,000
Owners’ Equity 1,400,000
Total L. + O.E. 3,000,000
36) Based on the information in Table 4-3, assuming that the firm has no preferred stock, and paid $250,000 in common dividends, the firm’s return on equity was:
a. 61%
b. 32%
c. 43%
d. 79%
Explanation / Answer
Return on Equity = Net Income/Shareholder's Equity
ROE = Profit after tax/owner's Equity
ROE = $850,000/$1,400,000 = .61 or 61%
a. 61%
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