please let me know if I'm right
common stock $600
additional paid-in capital $250
retained earnings $370
net income for year $240
I need return on common stockholder's equity=net income/stock equity=240/600=0.4
Do you mean return on common sh equity rate?
(Net income – Preferred dividends)
÷ Average common stockholders’ equity
That is the formula. Since you do not have any preferred dividends then you can leave it out.
thanks :)
took my test. answer 0.4 is not right :( I don't understand then....
Yes, you are correct. The formula to calculate the return on common stockholder's equity is:
Return on Common Stockholder's Equity = Net Income / Stock Equity
In this case, the net income for the year is $240 and the stock equity is $600. Plugging in these values into the formula, we can calculate:
Return on Common Stockholder's Equity = $240 / $600 = 0.4
So, the return on common stockholder's equity is 0.4 or 40%.