-What Is the Rate Earned on Common Stockholders' Equity for }

question 65

Multiple Choice

$\begin{array}{c}\text { Assets }\\\begin{array}{lr}\text { Cash and short-term investments } & \$ 30,000 \\\text { Accounts receivable net } & 20,000 \\\text { Inventory } & 15,000 \\\text { Property, plant, and equipment } & \underline {185,000} \\ \text { Total assets } & \underline {\$ 250,000} \\\end{array}\end{array}$


$\begin{array}{c}\text { Liabilities and Stockholders' Equity }\\\begin{array}{lr}\text { Current liablities } & \$ 45,000 \\\text { Long-term liabilities } & 70,000 \\\text { Stockholders' equity \_Common } & \underline {135,000} \\\text { Total liabilities and stockholders' equity } & \underline {\$ 250,000} \\\end{array}\end{array}$

$\begin{array}{c}\text { Income Statement}\\\begin{array}{lll}\text { Sales } \\\text { Cost of goods sold } \\\text { Gross margin } \\\text { Operating expense: } \\\text { Interest expense } \\\text { Net income }\end{array}\begin{array}{lll}\$ 85,000 \\45,000 \\\hline \$ 40,000 \\15,000 \\5,000 \\\hline \$ 20,000 \\\hline\end{array}\end{array}$
$\begin{array}{l}\begin{array}{lll} \text { Number of shares of common stock outstanding}\\ \text { Market price of common stock}\\ \text { Total dividends paid}\\ \text { Cash provided by operations}\\\end{array}\begin{array}{lll}6,000 \\\$ 20 \\\$ 9,000 \\\$ 30,000\end{array}\end{array}$

-What is the rate earned on common stockholders' equity for Diane Company?

• A)6.75%
• B)14.8%
• C)7.4%
• D)13.5%

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Definitions:

Duty of Care

A legal obligation which requires a person to adhere to a standard of reasonable care while performing any acts that could foreseeably harm others.

Foreseen

Anticipated or predicted as likely to happen in the future.

Rattlesnake

A venomous snake known for the distinctive rattle at the end of its tail, which it shakes as a warning signal to potential predators or threats.

Liability

Legal responsibility for one's actions or omissions, which may result in damages or legal penalties.