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

question 167

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. $\begin{array}{lr}\text { Assets }\\\text { Cash and short-term investments } & \$ 45,000 \\\text { Accounts receivable (net) } & 25,000 \\\text { Inventory } & 20,000 \\\text { Property, plant and equipment } & 270,000 \\\quad \text { Total Assets } & \$ 360,000\end{array}$

$\begin{array}{lr}\text { Liabilities and Stockholders' Equity }\\\text { Current liabilities } & \$ 50,000 \\\text { Long-term liabilities } & 90,000 \\\text { Stockholders' equity—common } & 220,000 \\\quad \text { Total Liabilities and Stockholders' Equity } & \$ 360,000\end{array}$ $\begin{array}{lr}\text { Income Statement }\\\text { Sales } & \$ 150,000 \\\text { Cost of goods sold } & 66,000 \\\text { Gross profit } & 84,000 \\\text { Operating expenses } & 29,000 \\\quad \text { Net income } & 55,000 \\\\\text { Number of shares of common stock } & 6,000 \\\text { Market price of common stock } & \$ 20 \\\text { Dividends per share } & 50\end{array}$ What is the return on common stockholders' equity for Ortiz?

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

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Definitions:

Marginal Cost

The price involved in producing one more unit of a product or service.

Marginal Revenue

The additional revenue that is gained by selling one more unit of a product.

Deadweight Losses

Economic inefficiencies that occur when market equilibrium is disrupted, leading to a loss of economic welfare.

Lowest ATC

The point where a firm achieves the lowest average total cost of production, optimizing operational efficiency.