TEW COMPANY
Balarce Sheet
as of Decermber 31 TEW COMPANY
Income Statement
for the Year Ended Decernber 31

question 36

Multiple Choice

TEW COMPANY
Balarce Sheet
As of Decermber 31
$\begin{array}{lr}\text { ASSETS } \\\text { Cash } & \$ 20,000 \\\text { Accounts receivable } & 80,000 \\\text { Inventory } & 50,000 \\\text { Net plant and equipment } & 250,000\\\text { Total assets }&\$400,000\\\\\text { LIABIlTES AND STOCKHOLDERS' EQUTYY }\\\text { Accounts payable } & \$ 40,000 \\\text { Accrued expenses } & 60,000 \\\text { Long-term debt } & 130,000 \\\text { Common stock } & 100,000 \\\text { Paid-in capital } & 10,000 \\\text { Retained earnings } & 60,000\\\text { Total liabilities and stockholders' equity }&\$400,000\end{array}$
TEW COMPANY
Income Statement
For the year ended Decernber 31
$\begin{array}{ll}\text {Sales (all on credit) }&\$500,000 \\\text { Cost of goods sold}&200,000 \\\text {Gross profit }& \$300,000\\\text { Sales and administrative expenses}&20,000 \\\text { Fixed lease expenses }&10,000\\\text {Depreciation }&40,000 \\\text { Operating profit}&\$230,000 \\\text {Interest expense }&20,000 \\\text {Profit before taxes }&\$210,000 \\\text { Taxes \( (30 \%) \) }&73,500 \\\text { Net income}& \$136,500\\\end{array}$

Refer to the tables above. The firm's return on equity is ________.

• A) 136.5%
• B) 34.13%
• C) 80.29%
• D) 57.5%

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