Luther Corporation Consolidated Income Statement Year ended December 31 (in $mil
ID: 2815084 • Letter: L
Question
Luther Corporation
Consolidated Income Statement
Year ended December 31 (in $millions)
2006
2005
Total sales
610.1
559.9559.9
Cost of sales
(500.2)
(382.9382.9 )
Gross profit
109.9
177177
Selling, general, and
administrative expenses
(40.5)
(35.635.6 )
Research and development
(24.6)
(22.422.4 )
Depreciation and amortization
(3.6)
(3.83.8 )
Operating income
41.2
115.2115.2
Other income
minusminus
minusminus
Earnings before interest and taxes (EBIT)
41.2
115.2115.2
Interest income (expense)
(25.1)
(15.215.2 )
Pretax income
16.1
100100
Taxes
(5.5)
(3535 )
Net income
10.6
6565
Price per share
$16
$15
Sharing outstanding (millions)
10.2
8.0
Stock options outstanding (millions)
0.3
0.2
Stockholders' Equity
126.6
63.6
Total Liabilities and Stockholders' Equity
533.1
386.7
Refer to the income statement above. Luther's return on equity (ROE) for the year ending December 31, 2005 is closest to:
A.
204.4204.4 %
B.
81.7681.76 %
C.
102.2102.2 %
D.
122.64122.64 %
2006
2005
Total sales
610.1
559.9559.9
Cost of sales
(500.2)
(382.9382.9 )
Gross profit
109.9
177177
Selling, general, and
administrative expenses
(40.5)
(35.635.6 )
Research and development
(24.6)
(22.422.4 )
Depreciation and amortization
(3.6)
(3.83.8 )
Operating income
41.2
115.2115.2
Other income
minusminus
minusminus
Earnings before interest and taxes (EBIT)
41.2
115.2115.2
Interest income (expense)
(25.1)
(15.215.2 )
Pretax income
16.1
100100
Taxes
(5.5)
(3535 )
Net income
10.6
6565
Price per share
$16
$15
Sharing outstanding (millions)
10.2
8.0
Stock options outstanding (millions)
0.3
0.2
Stockholders' Equity
126.6
63.6
Total Liabilities and Stockholders' Equity
533.1
386.7
Explanation / Answer
We have, for year ending december 31,2005
Return on equity = Net Income / Shareholders equity
= $65/$63.6
=102.2012%
Ans is option C
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