The Following Information Pertains to Ortiz Company What Is the Return on Common Stockholders' Equity for Ortiz

question 54

Multiple Choice

The following information pertains to Ortiz Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. $\begin{array}{lr}\text { Assets }\\\text { Cash and short-term investments } & \$ 45,000 \\\text { Accounts receivable (net) } & 25,000 \\\text { Inventory } & 20,000 \\\text { Property, plant and equipment } & 270,000 \\\quad \text { Total Assets } & \$ 360,000\\\text { Liabilities and Stockholders' Equity }\\\text { Current liabilities } & \$ 50,000 \\\text { Long-term liabilities } & 90,000 \\\text { Stockholders' equity—common } & 220,000 \\\text { Total Liabilities and Stockholders' Equity } & \$ 360,000\end{array}$ $\begin{array}{lr}\text { Income Statement }\\\text { Sales } & \$ 150,000 \\\text { Cost of goods sold } & 66,000 \\\text { Gross profit } & 84,000 \\\text { Operating expenses } & \underline{29,000} \\ \text { Net income } & \$ 55,000\\\\\text { Number of shares of common stock } & 6,000 \\\text { Market price of common stock } & \$ 20 \\\text { Dividends per share } & .50\end{array}$ What is the return on common stockholders' equity for Ortiz?

• A) 25%
• B) 50%
• C) 12.5%
• D) 15.3%

---

Definitions:

Net Income

The profit of a company after all expenses and taxes have been subtracted from total revenue.

Debt/Interest Planning

The process of managing a company's or individual's debt load and the associated interest expenses, often to reduce costs or optimize tax implications.

Forecast Interest

The predicted amount of interest expenses or income, often used in financial planning and budgeting to estimate future financial performance.

Planned Debt

Borrowing that is anticipated and strategically used for business operations, expansion, or other purposes.