The comparative financial statements of Stargel Inc. are as follows. The market
ID: 2525205 • Letter: T
Question
The comparative financial statements of Stargel Inc. are as follows. The market price of Stargel common stock was $119.70 on December 31, 20Y2.
Required:
Determine the following measures for 20Y2, rounding to one decimal place, except dollar amounts which should be rounded to the nearest cent. Use the rounded answer of the requirement for subsequent requirement, if required. Assume 365 days a year.
Stargel Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Retained earnings, January 1 $5,375,000 $4,545,000 Net income 900,000 925,000 Total $6,275,000 $5,470,000 Dividends: Preferred stock dividends $45,000 $45,000 Common stock dividends 50,000 50,000 Total dividends $95,000 $95,000 Retained earnings, December 31 $6,180,000 $5,375,000Explanation / Answer
Answer
Return on total assets = Net Income/Average Total Asset
Return on total assets = 900000/9267500
Return on total assets = 9.7%
Return on stockholders’ equity = Net Income/Average Stock holders Equity
Return on stockholders’ equity = 900000/6777500
Return on stockholders’ equity = 13.3%
Return on common stockholders’ equity = (Net Income-Preferred Stock Dividend)/ Average Common stockholders’ equity
Return on common stockholders’ equity = (900000-45000)/6277500
Return on common stockholders’ equity = 13.6%
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