Question

the balance sheet at the end of each of the first two years of operations indicate the following

                                     2012.              2011
total current assets.      600000.          560000
total investments.          60000.             40000
property plant & equip. 900000.        700000
total current liab.              125000.        65000
long term liab.                 350000.        250000
pref. 9% stock 100 par.     100000.      100000
common stock $ 10 par.    600000.     600000
paid in capital in excess of par common stock
                                            75000.        75000
retained earnings.             310000.       210000

If net income is 115000 and interest expense is 30000 for 2012 what is the rate earned on stockholders equity for 2012 round percent to one decimal point

Answer 1

Earnings Available to Common Stock holders
Net Income	$115000
less: Preference Dividend ($100,000*9%)	$9000
Earnings Available to Common Stock holders	$106000
Total Common Stock holders Equity
Common Stock par Value	$       6,00,000
Common Stock inexcess of Par value	$           75,000
retained earnings	$       3,10,000
Total Common Stock holders Equity	$       9,85,000
Rate earned on Equity =Amount available to equity hollders /Total Common Stock holders Equity *100 =$106000/$985000 *100 =10.76% =10.8% (Rounded off)