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    Return on Stockholder's Equity

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    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

    Compute the return on stockholders' equity if the company has sales of $20 million
    and the following net profit margin:
    a. 3 percent
    b. 5 percent

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    Solution Preview

    a) Sales = 20 million
    Net profit margin = 3%
    Net profit = 20*3%= 0.6 million
    Stockholder's ...

    Solution Summary

    This solution shows how to determine return on stockholder's equity with step-by-step calculations.