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Financial Statements for Larosa Company Appear Below Total Dividends During Year 2 Were

question 179

Multiple Choice

Financial statements for Larosa Company appear below:
$Financial statements for Larosa Company appear below: \begin{array}{|l|r|}\hline & \begin{array}{r} \text { Larned Company } \\ \text { Income Statement }\\\text { For the Year Ended December 31, Year 2 }\\\text { (dollars in thousands) } \end{array} \\ \\hline \text { Sales (All on Account) } & \$ 1870 \\ \hline \text { Costs of Goods Sold } & \$ 1300 \\ \hline \text { Gross Margin } & \$ 570 \\ \hline \text { Operating Expenses } & \$ 220 \\ \hline \text { Net Operating Income } & \$ 350 \\ \hline \text { Interest Expense } & \$ 40 \\ \hline \text { Net Income before Taxes } & \$ 310 \\ \hline \text { Income Taxes }(30 \%) & \$ 93 \\ \hline \text { Net Income } & \$ 217 \\ \hline \end{array} Total dividends during Year 2 were \$ 47,000 , of which \$ 10,000 were preferred dividends. The market price of a common share on December 31 , Year 2 was \$ 70 . -Larosa Company's return on common shareholders' equity for Year 2 was closest to which of the following? A) 12.0%. B) 12.6%. C) 12.7%. D) 13.4%.$
$\begin{array}{|l|r|}\hline & \begin{array}{r}\text { Larned Company } \\\text { Income Statement }\\\text { For the Year Ended December 31, Year 2 }\\\text { (dollars in thousands) }\end{array} \\\\hline \text { Sales (All on Account) } & \$ 1870 \\\hline \text { Costs of Goods Sold } & \$ 1300 \\\hline \text { Gross Margin } & \$ 570 \\\hline \text { Operating Expenses } & \$ 220 \\\hline \text { Net Operating Income } & \$ 350 \\\hline \text { Interest Expense } & \$ 40 \\\hline \text { Net Income before Taxes } & \$ 310 \\\hline \text { Income Taxes }(30 \%) & \$ 93 \\\hline \text { Net Income } & \$ 217 \\\hline\end{array}$
Total dividends during Year 2 were $\$ 47,000$ , of which $\$ 10,000$ were preferred dividends. The market price of a common share on December 31 , Year 2 was $\$ 70$ .

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

Definitions:

Required Rate Of Return

A minimum yearly interest rate that motivates companies or individuals to invest in a specific security or endeavor.

Strategic Options

Options for future, related business products or strategies.

Scenario Analysis

A process of analyzing possible future events by considering alternative possible outcomes (scenarios), often for the purpose of strategic planning.

Sales Level

The total volume or amount of sales achieved by a company within a specified period.