Pacific Fixtures lists the following accounts as part of its balance sheet.
Total assets $10,000,000
Accounts payable $ 2,000,000
Notes payable (8%) 1,000,000
Bonds (10%) 3,000,000
Common stock at par 1,000,000
Contributed capital in excess of par 500,000
Retained earnings 2,500,000
Total liabilities and stockholders' equity $10,000,000
a) Sales = 20 million
Net profit margin = 3%
Net profit = 20*3%= 0.6 million
This solution shows how to determine return on stockholder's equity with step-by-step calculations.