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Question
The following information pertains to Dallas Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit.
Assets
| Cash and short-term investments | $ 40,000 | |
| Accounts receivable (net) | 30,000 | |
| Merchandise inventory | 25,000 | |
| Property, plant, and equipment | 280,000 | |
| Total assets | $375,000 | |
Liabilities and Stockholders’ Equity
| Current liabilities | $ 60,000 | |
| Long-term liabilities | 95,000 | |
| Stockholders’ equity—common | 220,000 | |
| Total liabilities and stockholders’ equity | $375,000 | |
Income Statement
| Sales | $90,000 | |
| Cost of merchandise sold | 45,000 | |
| Gross profit | $45,000 | |
| Operating expenses | 15,000 | |
| Net income | $30,000 | |
| Number of shares of common stock | 6,000 | |
| Market price of common stock | $20.00 | |
| Dividends per share | $1.00 | |
| Net cash flows from operating activities | $40,000 |
What is the return on stockholders equity (rounded to one decimal place)?
a. 7.3%
b. 13.6%
c. 20.5%
d. 40.9%
Answer
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