Guys/Gals… I got stumped on this question, I know the formula but I cannot figure out how to pull the inputs from the data given. Any help would be great. Company Balance Sheet As of December 31, 20XX Year 1 – Year 2 Cash: $2,000 – $2,200 Account Receivables: $3,000 – $3,500 Inventory: $4,000 – $4,200 Total Current Assets: $9,000 – $9,900 Fixed assets at cost: $22,000-- $24,300 accumulated depreciation: $9,000 – $10,500 Net Fixed Assets: $13,000 – $13,800 Total Assets: $22,000 – $23,700 Q: Return on common equity for year 2 was closest to: a. 62 % b. 51 % c. 43 % Answer is b. 51% they show the formula as Net Income - Preferred Div. / Avg. Common Equity. For the formula they have $1860 - 0/ ($3000 + 4,296)/2 = 51% I went back through the FRA book to find how to solve I couldn’t find it any where. Please help me on how to get to the answer. Thanks.
it’s not possible to get that calculation with the data (asset side only of the B/S) which you have provided.
My thoughts exactly; however, this has come straight from the Stalla Passmaster. I did make a note that Peter Olinto made during his lecture and that was if you have two years balance sheet numbers presented then you can get return on common equity. Hopefully, someone here knows how!!