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    sasham's Avatar
    sasham Posts: 24, Reputation: 1
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    #1

    Apr 28, 2009, 06:57 PM
    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
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #2

    Apr 28, 2009, 10:38 PM

    "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.
    sasham's Avatar
    sasham Posts: 24, Reputation: 1
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    #3

    Apr 30, 2009, 07:47 PM

    Took my test.
    Answer 0.4 is not right
    I don't understand then...
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #4

    Apr 30, 2009, 11:30 PM

    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.
    sasham's Avatar
    sasham Posts: 24, Reputation: 1
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    #5

    Mar 24, 2010, 08:00 PM

    Forgot to say "Thanks, got it :)"
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #6

    Mar 28, 2010, 02:05 AM

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