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-   -   Return on equity (https://www.askmehelpdesk.com/showthread.php?t=347375)

  • Apr 28, 2009, 06:57 PM
    sasham
    return on equity
    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
  • Apr 28, 2009, 10:38 PM
    morgaine300

    "Common stockholder's equity" does not mean stock only. Equity means the entire net worth, like in your accounting equation.

    When it's common stockholder's equity, that means the part that doesn't go to the preferred shareholders, which in this case doesn't exist, so all equity belongs to common.
  • Apr 30, 2009, 07:47 PM
    sasham

    Took my test.
    Answer 0.4 is not right
    I don't understand then...
  • Apr 30, 2009, 11:30 PM
    morgaine300

    No, it's not .4. That's because you only included the stock. Equity isn't just stock. It's the entire equity of $1220.
  • Mar 24, 2010, 08:00 PM
    sasham

    Forgot to say "Thanks, got it :)"
  • Mar 28, 2010, 02:05 AM
    morgaine300

    Um, well, you're welcome. Better late than never, as they say. :-)

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