Answer: B. Jobs can be mastered quickly.
Explanation:
Job specialization is when the employees in an organization focuses and concentrates on one particular aspect in a organization. Specialization makes employees more efficient and also effective at their role.
Also, jobs can be mastered quickly since the employees typically focuses on one particular aspect in the organization.
Nautical has two classes of stock authorized: $10 par preferred, and $1 par value common. As of the beginning of 2015, 125 shares of preferred stock and 2,700 shares of common stock have been issued. The following transactions affect stockholders� equity during 2015:
March 1 Issue 2,700 additional shares of common stock for $13 per share.
April 1 Issue 175 additional shares of preferred stock for $37 per share.
June 1
Declare a cash dividend on both common and preferred stock of $0.40 per share to all stockholders of record on June 15.
June 30 Pay the cash dividends declared on June 1.
August 1 Repurchase 175 shares of common treasury stock for $10 per share.
October 1 Reissue 125 shares of treasury stock purchased on August 1 for $12 per share.
Nautical has the following beginning balances in its stockholders� equity accounts on January 1, 2015: Preferred Stock, $1,250; Common Stock, $2,700; Paid-in Capital, $19,200; and Retained Earnings, $11,200. Net income for the year ended December 31, 2015, is $7,500.
Required:
1. Record each of these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
2. Select whether each of these transactions would increase (+), decrease (?), on total assets, total liabilities, and total stockholders� equity by completing the following table. (If none of the categories apply for a particular item, leave the cell blank.)
Transaction Total Assets Total Liabilities Total Stockholders Equity
Issue common stock
Issue preferred stock
Declare cash divedens
Pay cash divedens
Repurchase treasury stock
Reissue treasury stock
Answer:
Nautical1. Journal Entries:
March 1:
Debit Cash Account $35,100
Credit Common Stock $35,100
To record the issue of 2,700 shares of common stock for $13 per share.
April 1:
Debit Cash Account $6,475
Credit Preferred STock $6,475
To record the issue of 175 shares of preferred stock for $37 per share.
June 1:
Debit Dividends $2,280
Credit Dividends Payable $2,280
To record dividends of $0.40 per share to all stockholders of record.
June 30:
Debit Dividends Payable $2,280
Credit Cash Account $2,280
To record the payment of cash dividends.
August 1:
Debit Treasury Stock $1,750
Credit Cash Account $1,750
To record the repurchase of 175 shares of common stock for $10 per share.
October 1:
Debit Cash Account $1,500
Credit Treasury Stock Account $1,500
To record the reissue of 125 shares of treasury stock for $12 per share.
2. Selection of whether each of these transactions would increase (+), decrease (?), on total assets, total liabilities, and total stockholders' equity:
Transaction Assets Liabilities Stockholders
Total Total Total Equity
Issue common stock $35,100 +$35,100 +$35,000
Issue preferred stock $6,475 +$6,475 +$6,475
Declare cash dividends $2,280 +$2,280 ?$2,280
Pay cash dividends $2,280 ?$2,280 ?$2,280
Repurchase treasury stock $1,750 ?$1,750 ?$1,750
Reissue treasury stock $1,500 +$1,500 +$1,500
Explanation:
a) Data and Calculations:
Authorized share capital:
$10 par preferred
$1 par value common
Issued, beginning of 2015:
Preferred = 125 shares
Common = 2,700 shares
b) The issue of 2,700 additional shares of common stock for $13 per share totalled $35,100. This amount is credited to the Common Stock and the receipt of cash debited to the Cash Account. The same is applicable with respect to the 175 additional shares issued at $37 per share.
c) When a cash dividend is declared, the stockholders of record on the record date of June 15 are noted, since they are the only ones that will participate in the dividends. The accounting records are debit to the dividend account and a credit to the Dividends Payable account, establishing the liability. The payment for the declared dividend is recorded with a debit to the Dividends Payable account to close the liability and a credit to the Cash Account.
d) Treasury stock is a stock of common stock repurchased by the company. The issue and reissue of treasury stock are treated in the treasury stock account if the costing method is used, otherwise, the par-value method would be operational.
The unfavorable volume variance may be due to all of the following factors except:_______
a. failure to maintain an even flow of work
b. machine breakdowns
c. failure to obtain enough sales orders
d. unexpected increases in the cost of utilities
Answer:
d. unexpected increases in the cost of utilities
Explanation:
there are several volume variances:
direct materials volume variancedirect labor volume variancemanufacturing overhead volume variance sales volume varianceUtilities are part of manufacturing overhead, but volume variances using the standard rates, so an unexpected increase in the cost of utilities will not affect the overhead volume variance.
The unfavorable volume variance can not be due because of unexpected Increases in the cost of utilities
Unfavorable volume variance means that the amount of applied fixed manufacturing overhead costs is less than the budgeted fixed manufacturing overhead costs
The machine breakdowns will affect production levels, thus, resulting to unfavorable volume variance.
The failure to maintain even flow of work will impact the production quantities, thus, resulting to unfavorable volume variances
The failure to obtain enough sales order will limit production quantities, thus, resulting to unfavorable volume variances.
Thus, the Option D is correct because unfavorable volume variance can not be due because of unexpected Increases in the cost of utilities
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Based on your case knowledge, to what extent do you agree or disagree with the following statement - "Kay Whitmore - Kodak CEO, had an understanding of Kodak's potential in the PC market. This was illustrated by her strong engagement with Bill Gates and Microsoft."
1. Strongly Agree
2. Mildly Agree
3. Neither Agree nor Disagree
4. MIldly Disagree
5. Strongly Disagree
6. Not Applicable
Answer:
3. Neither Agree nor Disagree
Explanation:
The reason was that the Kay Whitmore's engagement with Bill Gates and Microsoft has not much impacts on the potential of Kodak's products to exploit additional opportunities in Microsoft hence statement in consideration is not a one side argument as it is doubtful position.
So I am neither agreeing nor disagreeing with the statement hence the option 3 is correct here.
Suppose Real GDP is $700 billion and Natural Real GDP is $620 billion. To eliminate this ________________gap, Keynesian theory indicates that government should ______________________.
Answer: d. inflationary; decrease government purchases or increase taxes
Explanation:
Suppose Real GDP is $700 billion and Natural Real GDP is $620 billion. To eliminate this inflationary gap, Keynesian theory indicates that government should decrease government purchases or increase taxes.
The Real GDP is greater than the Natural real GDP which is the potential GDP. When that happens the Economy is said to be overheated and producing above its limits as Aggregate Demand is above Aggregate Supply.
To combat this the Government according to Keynes should embark on policy that will reduce economic activity. The Government can use Contractionary Fiscal Policy that will see it reduce its spending and/or increase taxes. Both of these will have the effect of reducing the amount of money in the economy left for both investment and consumption and cause a fall in the Aggregate Demand.
When gasoline gallons are priced in terms of number of seashells, seashells serve as: Group of answer choices
Answer:
Unit of account
Explanation:
Money serves three functions :
1. Unit of account : money serves the function of determining the value of a good or service. It is usually assumed that goods that are more highly priced are more valuable that goods that have lower prices
2. Medium of exchange : goods and services can be exchanged for money. For example, if I want to buy a gallon of gasoline and pay 4 seashells, money has served as a medium of exchange.
3. store of value: money can be saved, retrieved and exchanged sometimes in the future
The internal rate of return method is used to analyze a $831,500 capital investment proposal with annual net cash flows of $250,000 for each of the six years of its useful life. a. Determine a present value factor for an annuity of $1, which can be used in determining the internal rate of return. Carry your answer out to three decimal places.
Answer:
annuity factor for 20% and 6 periods = 3.326
Explanation:
the IRR represents the discount rate at which a project's NPV = 0
NPV = initial outlay + PV of future cash flows
NPV = 0
initial outlay = -$831,500
PV of future cash flows = $831,500 = cash flow x annuity factor
annuity factor = $831,500 / $250,000 = 3.326
using an annuity table and looking for the annuity factors for 6 periods, we find that the annuity factor for 20% and 6 periods = 3.326.
So our IRR = 20%
Choose three organizations that you believe have had the greatest impact on the current state of safety and health programs in the United States. Summarize the purpose of each organization, and discuss how you believe you can use these organizations to improve your ability to perform your duties as a safety and health professional.
The correct answer to this open question is the following.
The three organizations would be OSHA, NIOSH, and NACOSH.
OSHA stands for Occupational Safety and Health Administration. It tries to ensure that the workers labor under the proper safety and health conditions in their workplace.
NIOSH stands for the National Instituto for Occupational Safety and Health. This organization basically is dedicated to researching to know the working conditions of workers in America and make recommendations.
NACOSH stands for the National Advisory Committee on Occupational Safety and Health. It functions as an adviser or counselor to the Department of Labor on safety and security issues.
These three can definitely be used to improve my ability to perform my duties as a safety and health professional in that they include a series of recommendations, programs, and educational tips to be applied in the workplace and diminish the possibility of accidents or how to react in case of one.
A NASDAQ security is bid at $30.25 and offered at $30.75. An over-the-counter trader effects a trade at $30.75 and charges a commission of $.50 to the customer. The price that will show on the tape is:
Answer:
$30.75
Explanation:
Given that
Security bidding = $30.25
Offered price = $30.75
over the counter trading = $30.75
Commission charged = $0.50
based on the above information, the price that shows on the tape is equivalent to the over the counter trading price i.e $30.75 also it does not include the commission charged i.e $0.50
Hence, the price is $30.75
of a portfolio. The beta of four stocksG, H, I, and Jare , , , and , respectively. What is the beta of a portfolio with the following weights in each asset: LOADING...? What is the beta of portfolio 1?
Answer: 1.02
Explanation:
The Portfolio Beta will be the weighted average of the betas of the individual stocks in Portfolio 1.
Portfolio Beta = (weight in G * beta of G) + (weight in H * beta of H) + (weight in I * beta of I) + (weight in J * beta of J)
= (0.25 * 0.45) + ( 0.25 * 0.82) + ( 0.25 * 1.14) + ( 0.25 * 1.66)
= 0.1125 + 0.205 + 0.285 + 0.415
= 1.0175
= 1.02
At 17 years old, Otto signed a contract to purchase a new Hummer by advancing a payment of $50,000. However, when Otto turned 20, he wished to disaffirm this contract. Does the law permit this
Walnut has received a special order for 2,700 units of its product at a special price of $200. The product normally sells for $260 and has the following manufacturing costs: Per unit Direct materials $ 64 Direct labor 34 Variable manufacturing overhead 44 Fixed manufacturing overhead 103 Unit cost $ 245 Walnut is currently operating at full capacity and cannot fill the order without harming normal production and sales. If Walnut accepts the order, what effect will the order have on the company’s short-term profit?
a. $162,000 decrease
b. $121,500 increase
c. $121,500 decrease
d. Zero.
Answer:
a. $162,000 decrease
Explanation:
Sales $540,000
(2700 unit * $200)
Less:
Direct materials $172,800
(2700 unit * 64)
Direct labor $91,800
(2,700 unit * $34)
Variable manufacturing overhead $118,800
(2700 unit * $44)
Contribution loss from existing sale $318,600 $702,000
2700 unit * ($260-$64-$34-$44)
Effect on Net operating income -$162,000
Seven Manufacturing Corporation uses both standards and budgets. The company estimates that production for the year will be 100,000 units of Product Fast. To produce these units of Product Fast, the company expects to spend $600,000 for materials and $800,000 for labor.
Required:
Compute the estimates for a standard cost.
Answer:
Unitary cost= $14
Explanation:
Giving the following information:
Production= 100,000
To produce these units of Product Fast, the company expects to spend $600,000 for materials and $800,000 for labor.
First, we need to calculate the total cost and then the unitary cost:
Total cost= 600,000 + 800,000= $1,400,000
Unitary cost= 1,400,000/100,000= $14
You are aware that your neighbor trades stocks based on confidential information he overhears at his workplace. This information is not available to the general public. This neighbor continually brags to you about the profits he earns on these trades. Given this, you would tend to argue that the financial markets are at best _____ form efficient.
Answer:
Semi-strong Form Efficient.
Explanation:
There are three levels of market efficiency as weak, semi-strong and strong.
In a semi-strong form efficient market, the stock prices change independently of the previous return points and the current information so it is not possible to predict the future stock prices.
The example given in the question, which states that the neighbor has non-public information, can be classified as a semi-strong form efficient market.
I hope this answer helps.
"Which of the following are covered under the Securities Exchange Act of 1934? I Registration of new issues II Stabilization of new issues III Registration of exchanges IV Registration of broker/dealers"
Answer: II. stabilization of new issues
III. registration of exchanges
IV. registration of broker-dealers
Explanation:
The Securities Exchange Act of 1934 was put in place in order to be in charge of security trading.
From the options, those that are covered under the Securities Exchange Act of 1934 include the stabilization of new issues, the registration of exchanges and the registration of broker/dealers.
It should be noted that the Securities Exchange Act of 1934 does not cover the registration of new issues.
Central to agency theory is the concern with problems that can arise between the principals who are the owners of the firm and the agents who are the people who are paid by outside consultants to perform a job on their behalf.
a. True
b. False
Answer:
Correct Answer:
a. True
Explanation:
Agency theory is a principle that is used to explain and resolve issues in the relationship between business principals and their agents in any given company's establishment. In addition, the relationship could be one that is between shareholders, as principals on one hand, and company executives, as agents.
Agency problem is that many authors have found that include separations of ownership from control, conflict of interest and risk adverseness etc.
What is the term agency theory about?
Agency theory is a principle that is used to explain and resolve issues in the relationship between business principals and their agents in any given company's establishment.
In addition, the relationship could be one that is between shareholders, as principals on one hand, and company executives, as agents.
Therefore, correct option is True.
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Duerr company makes a $73,000, 90-day, 10% cash loan to Ryan Co. The maturity value of the loan is: (Use 360 days a year.)
Answer: $74,825
Explanation:
Maturity value is the amount that a borrower will pay to the lender when the loan matures.
Based on the above analysis, the interest will be:
= $73,000 × 10% × 90/360
= $73,000 × 0.1 × 0.25
= $1825
Maturity value will now be the addition of the principal and the interest. This will be:
= $73,000 + $1825
= $74,825
Which of the following statements is not true about self-awareness?
a. Self-awareness involves a capacity to monitor and control biases that potentially affect your decision making.
b. Managers who have low self-awareness are superior performers.
c. Self-awareness can be increased by acquiring multiple experiences in diverse situations and with diverse others.
d. Self-awareness is best described as the capacity for introspection and the ability to reconcile oneself as an individual separates from the environment and other individuals.
Answer:
b. Managers who have low self-awareness are superior performers.
Explanation:
Self-awareness can be defined as a mental process, which occurs when an individual has knowledge about himself, about his knowledge, his actions and attitudes.
Therefore, in the workplace, having self-awareness is essential for a manager to achieve high performance, as this is a skill that includes knowing your skills, values, internal resources that ensure that there is the possibility of better monitoring of environments and oneself, control of emotions and improved perception of oneself and others.
This is a characteristic that adds to a manager 's assertive ability to establish communication focused on ethics, mutual respect, cordiality, etc.
The statement that is not true about self awareness from the list is B. "Managers who have low self-awareness are superior performers."
Self awareness refers to the ability of one to understand their thoughts, feelings, impulses and actions. Being self aware is a very important leadership attribute.
Therefore the statement that 'managers who have low self awareness are superior performers' is wrong.
A manager that lacks self awareness will definitely not perform their job effectively.
Self awareness helps one to become better at making decisions, it helps control biases, communicate more effectively and build good relationships in the work place or other places.
Thus, we can conclude that managers who have low self awareness are not superior performers.
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McKerley Corp. has preferred stock outstanding that will pay an annual dividend of $3.70 per share with the first dividend exactly 14 years from today. If the required return is 3.6 percent, what is the current price of the stock?
Answer:
$64.89
Explanation:
Calculation for the current price of the stock
First step is to find the preference stock value at end of 13 years
Using this formula
P13= Annual dividend/Required return
Let plug in the formula
P13=$3.70/.036
P13= $102.78
The second step is to calculate for the current price of the stock
Using this formula
P0= P13/(1+Required return)^Dividend years
Let plug in the formula
P0= $102.78/(1 + .036)^13
P0=$102.78/(1.036)^13
P0=$102.78/1.5837
P0=$64.89
Therefore the current price of the stock will be $64.89
The break-even point is a.the maximum possible operating loss. b.where the total sales line intersects the total costs line on a cost-volume-profit chart. c.the total fixed costs. d.the maximum possible operating income.
Answer:
The answer is B.
Explanation:
To a layman, break-even point is the point where an entity neither make profit nor loss. It is the point where total revenue equals total cost(where the total sales line intersects the total costs line on a cost-volume-profit chart).
Points greater or above this intersection or point mean the firm is making profit and points lesser or below this intersection or point mean the firm is making loss.
Oriole Company purchased equipment for $41600. Sales tax on the purchase was $2496. Other costs incurred were freight charges of $624, repairs of $364 for damage during installation, and installation costs of $696. What is the cost of the equipment
Answer:
The cost of the equipment is $45,416.
Explanation:
The cost of a newly purchased equipment is the addition of all relevant costs uncured in order to make the equipment ready for use.
The cost of the equipment includes costs such as purchase price, tax paid on the purchase, installation costs, etc.
However, any cost incurred to repair any damage to an equipment during installation is not part of equipment cost. Such repair costs are just ordinary expenses that are charged to the income statement during the period.
Based on the explanation above, the cost of the equipment by Oriole Company can be calculated as follows:
Equipment cost = Purchase price + Sales tax + Freight charges + Installation costs ..................... (1)
Since,
Purchase price = $41,600
Sales tax on the purchase = $2.496.
Freight charges = $624
Installation costs = $696.
Substituting the values into equation (1), we have:
Equipment cost = $41,600 + $2,496 + $624 + $696 = $45,416
Therefore, the cost of the equipment is $45,416.
Idaho Industries Inc. is considering a project that has an initial aftertax outlay or aftertax cost of $450,000. The respective future cash inflows from its fiveyear project for years 1 through 5 are $95,000 each year. Idaho expects an additional cash flow of $60,000 in the fifth year. The firm uses the IRR method and has a hurdle rate of 10%. Will Idaho accept the project? A. Idaho accepts the project because it has an IRR greater than 10%. B. Idaho accepts the project because it has an IRR greater than 5%. C. Idaho rejects the project because it has an IRR less than 10%. D. There is not enough information to answer this question.
Answer:
c
Explanation:
Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested
IRR can be calculated using a financial calculator
Cash flow in year 0 = $-450,000
Cash flow each year from year 1 to 4 = $95,000
Cash flow in year 5 = $95,000 + $60,000 = $155,000
IRR = 5.62%
Idaho would reject the project because the IRR is less than the hurdle rate
To find the IRR using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the IRR button and then press the compute button.
An investor holds a 10 year bond pays a coupon rate of 9%. The yeid to maturity of the bond is 10% . The bond is trading:
Answer:
the bond is trading at a discount
Explanation:
There is an inverse relationship between the yield and the price of the bond.
As the yield goes up, the price of the bond goes down and as the yield goes down, the price of the bond goes up.
The yield - 10%, is greater than the coupon rate - 9%, the price will be less than the par value, and we say that the bond is trading at a discount.
A stock had returns of 17.88 percent, −5.16 percent, and 20.39 percent for the past three years. What is the variance of the returns?
Answer:
Variance of the return = 0.01983
Explanation:
[tex]S^{2}[/tex]= Σ[tex](X-X)^{2}[/tex]/ N - 1
Mean return = 17.88% + -5.16% + 20.39% = 11.0367%
Variance = [(17.88% - 11.0367%)2 + (-5.16% - 11.0367%)2 + (20.39% - 11.0367%)2] /(3 - 1)
Variance = [0.004683 + 0.026233 + 0.008748]/2
Variance = 0.01983
You own 150 shares of Western Feed Mills stock valued at $41.20 per share. What is the dividend yield if your annual dividend income is $372
Answer:
6.01%
Explanation:
Calculation for the dividend yield
Using this formula
Dividend yield=(Annual dividend income/Numbers of shares)/Amount per shares
Let plug in the formula
Dividend yield =($372/150 shares)/$41.20 per share
Dividend yield =$2.48/$41.20
Dividend yield =0.0601*100
Dividend yield =6.01%
Therefore Dividend yield will be 6.01%
Mr. Fred Mitchell is requesting the birth record for Amy, his birth daughter. Mr. and Mrs. Mitchell gave Amy up for adoption four years ago. Should you release the records to him? Why or why not? Yes or No
Answer:
"No" would be the correct choice.
Explanation:
The documentation could not be issued to him whenever their Amy is indeed not Mr. Mitchel's legal offspring attributable to some other individual's custody. They cannot compensate for the demand as well as text.Whether there is some doubt about either the approved note's authenticity, seek to contact the individual by contacting himself, either correlate signs on organizational documents.The Project Evaluation and Review Technique (PERT) was developed as a means of scheduling and controlling projects with constant activity times. Group of answer choices False True
Answer: False
Explanation:
The Program Evaluation and Review Technique (PERT) is used to know the schedule tasks and also know the critical path variation. It is useful to know the length of time that'll be needed for the completion of every task and how it relates to others in order to know the entire time needed to complete the particular project.
The Project Evaluation and Review Technique (PERT) is not a means of scheduling and controlling projects with constant activity times. The activity time normally varies.
The calculation of WACC involves calculating the weighted average of the required rates of return on debt and equity, where the weights equal the percentage of each type of financing in the firm's overall capital structure.
_________ is the symbol that represents the cost of preferred stock in the weighted average cost of capital (WACC) equation.
Bryant Co. has $2.3 million of debt, $1.5 million of preferred stock, and $1.8 million of common equity. What would be its weight on common equity?
A. 0.32
B. 0.24
C. 0.22
D. 0.30
Answer:
Option A is the correct answer
Weight of equity =0.32
Explanation:
Weighted average cost of capital is the average cost of all of the long-term types of finance used by a company weighted according to the that amount of finance used in relation to the total pool of fund.
The weight is the market value of nominal value of the source of fund as a proportion of the total capital funds.
Total capital funds = Debt funds + Preferred Funds + Equity funds
= ($2.3 + $1.5 + $1.8 ) million = $5.6 million
Weight of equity = Equity capital/Total capital funds
= 1.8/5.6 =0.32
Weight of equity =0.32
A retail operation has an average gross margin of 35%. If the average monthly sales for the store is $200,000.00, what is the cost of goods sold?
Answer:
COGS= $130,000
Explanation:
Giving the following information:
A retail operation has an average gross margin of 35%.
Sales= $200,000.00
To calculate the cost of goods sold, we need to use the following formula:
Gross margin= sales - COGS
COGS= sales - gross margin
COGS= 200,000 - (200,000*0.35)
COGS= $130,000
The offer curve describes Group of answer choices different wage offers a firm will make to workers of different education levels. different wage-and-risk level offers made by different firms. different wage-and-risk levels available to one firm. different risk levels associated with the same wage level.
Answer: different wage-and-risk level offers made by different firms.
Explanation:
The offer curve show the different wage-and-risk level offers made by different firms.
When firms make different wages and risk level offers, the offer curve can be used to show the comparison and relationship between the offers by the firms that are involved.
Firm M has a margin of 7%, turnover of 2.0, sales of $910,000, and average stockholders' equity of $490,000. Required: Calculate Firm M’s average total assets, net income, return on investment (ROI), and return on equity (ROE
Answer:
1. Average total asset = $455,000
2. Net income = $63,700
3. Return on investment = 14%
4. Return on equity (ROE) = 13%
Explanation:
These can be calculated as follows:
1. Average total asset
To calculate this, we use the formula for calculating the Asset turnover ratio as follows:
Asset turnover ratio = Sales / Average total asset ……………………………… (1)
Where;
Turnover = asset turnover ratio = 2
Sales = $910,000
Average total asset = ?
Substituting the values into equation (1) and solve for average total asset, we have:
2 = $910,000 / Average total asset
Average total asset = $910,000 / 2
Average total asset = $455,000
2. Net income
To calculate this, we use the formula for calculating net income margin as follows:
Net income margin = Net income / Sales ……………………………………. (2)
Where,
Margin = Net income margin = 7%, or 0.07
Net income = ?
Sales = $910,000
Substituting the values into equation (2) and solve for net income, we have:
7% = Net income / $910,000
Net income = $910,000 * 7%
Net income = $63,700
3. Return on investment
To calculate this, we use the formula for calculating the return on investment as follows:
Return on investment = Net income / Average total assets ……………… (3)
Where;
Net income = $63,700
Average total asset = $455,000
Substituting the values into equation (3), we have:
Return on investment = $63,700 / $455,000
Return on investment = 0.14, or 14%
4. Return on equity (ROE)
To calculate this, we use the formula for calculating the return on equity (ROE) as follows:
Return on equity (ROE) = Net income / Average stockholders' equity…….. (4)
Net income = $63,700
Average stockholders' equity = $490,000
Substituting the values into equation (4), we have:
Return on equity (ROE) = $63,700 / $490,000
Return on equity (ROE) = 0.13, or 13%
