Financial Statements for Laroche Company Appear Below:

Shareholders' Equity

question 169

Multiple Choice

Financial statements for Laroche Company appear below:

Shareholders' Equity:
$\begin{array}{|l|r|}\hline & \begin{array}{r}\text { Larned Company } \\\text { Income Statement }\\\text { For the Year Ended December 31, Year 2 }\\\text { (dollars in thousands) }\end{array} \\\hline \text { Sales (All on Account) } & \$ 2250 \\\hline \text { Costs of Goods Sold } & \$ 1570 \\\hline \text { Gross Margin } & \$ 680 \\\hline \text { Operating Expenses } & \$ 270 \\\hline \text { Net Operating Income } & \$ 410 \\\hline \text { Interest Expense } & \$ 30 \\\hline \text { Net Income before Taxes } & \$ 380 \\\hline \text { Income Taxes }(30 \%) & \$ 114 \\\hline \text { Net Income } & \$ 266 \\\hline\end{array}$
Total dividends during Year 2 were $\$ 166,000$ , of which $\$ 10,000$ were preferred dividends. The market price of a common share on December 31, Year 2 was $\$ 150$ .

-Laroche Company's return on common shareholders' equity for Year 2 was closest to which of the following?

• A) 21.2%.
• B) 22.0%.
• C) 23.1%.
• D) 24.0%.

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Definitions:

Secured Interest

An interest in personal property or fixtures that secures payment or performance to a creditor.

Personal Property

Tangible, movable objects.

Uniform Commercial Code

A comprehensive set of laws governing all commercial transactions in the United States.

Perfection

The series of legal steps a secured party takes to protect its right in the collateral from the other creditors who want their debt returned through the same collateral.