A Company Reports the Following

question 40

Essay

A company reports the following:
Net income$ .................................................350,000
Preferred dividends.......................................50,000
Average stockholders' equity.......................1,000,000
Average common stockholders' equity........800,000?
Determine the (a) return on stockholders' equity and (b) return on common stockholders' equity. Round your answers to one decimal place.

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Definitions:

Worthless

Describes an item that has no value, utility, or financial gain.

Exercise Price

The specified price on an option contract at which the option holder can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

2-for-1 Split

A stock split in which a company divides its existing shares into two, reducing the price per share while keeping the total market capitalization the same.

Underlying Stock

The stock that is the basis or the security that options, futures, or other derivatives contracts are derived from or based upon.