Question

Comparative financial statement data of Manfield, Inc.​ follow:

Compute the following ratios for 2018 and 2017​:
	a.	Current ratio
	b.	Cash ratio
	c.	​Times-interest-earned ratio
	d.	Inventory turnover
	e.	Gross profit percentage
	f.	Debt to equity ratio
	g.	Rate of return on common​ stockholders' equity
	h.	Earnings per share of common stock
	i.	​Price/earnings ratio
2.	Decide​ (a) whether Manfield​'s ability to pay debts and to sell inventory improved or deteriorated during 2018 and​ (b) whether the investment attractiveness of its common stock appears to have increased or decreased.

Additional Info:

1.	Market price of Manfield​'s common​ stock: $66.15 at December​ 31, 2018​, and $45.12 at December​ 31, 2017.
2.	Common shares​ outstanding: 13,000 on December​ 31, 2018 and 12,000 on December​ 31, 2017 and 2016.
3.	All sales are on credit.

Manfield, Inc.
Comparative Income Statement
Years Ended December 31, 2018 and 2017
			2018	2017
		Net Sales Revenue	$461,000	$426,000
		Cost of Goods Sold	238,000	212,000
		Gross Profit	223,000	214,000
		Operating Expenses	134,000	132,000
		Income From Operations	89,000	82,000
		Interest Expense	9,000	10,000
		Income Before Income Tax	80,000	72,000
		Income Tax Expense	21,000	23,000
		Net Income	$59,000	$49,000

Manfield, Inc.
Comparative Balance Sheet
December 31, 2018 and 2017
			2018	2017	2016*
		Assets
		Current Assets:
		Cash	$92,000	$90,000
		Accounts Receivables, Net	107,000	116,000	$103,000
		Merchandise Inventory	143,000	163,000	203,000
		Prepaid Expenses	14,000	8,000
		Total Current Assets	356,000	377,000
		Property, Plant, and Equipment, Net	216,000	181,000
		Total Assets	$572,000	$558,000	$596,000
		Liabilities
		Total Current Liabilities	$225,000	$241,000
		Long-term Liabilities	119,000	98,000
		Total Liabilities	344,000	339,000
		Stockholders' Equity
		Preferred Stock, 4%	98,000	98,000
		Common Stockholders' Equity, no par	130,000	121,000	89,000
		Total Liabilities and Stockholders' Equity	$572,000	$558,000
		* Selected 2016 amounts

I am all the way to g but I'm so confused, no matter how I calculate it I just keep getting answers that the program says wrong. But I literally follows what the books says to calculate it...... Question G is making me frustrated.

g. Compute the rate of return on common​ stockholders' equity of 2018 and 2017. (Round your answers to one tenth of a​ percent, X.X%.)

Rate of return on common stockholders' equity = (Net income - Preferred dividends) / Average common stockholder's equity

Answer 1

The rate of return on common stockholder's equity can be calculated with the use of following formula:

Rate of Return on Common Stockholders' Equity = (Net Income - Preferred Dividends) / Average Common Stockholder's Equity*100

_____

2018:

Here Net Income = $59,000, Preferred Dividend = 98,000*4% = $3,920 and Average Common Stockholder's Equity = (130,000 + 121,000)/2 = $125,500

Using these values in the above formula, we get,

Rate of Return on Common Stockholders' Equity (2018) = (59,000 - 3,920)/125,500*100 = 43.9%

_____

2017:

Here Net Income = $49,000, Preferred Dividend = 98,000*4% = $3,920 and Average Common Stockholder's Equity = (121,000 + 89,000)/2 = $105,000

Using these values in the above formula, we get,

Rate of Return on Common Stockholders' Equity (2017) = (49,000 - 3,920)/105,000*100 = 42.9%