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Return on Equity

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Utilizing the following information on the Smithwick Company,compute the firm's return on equity.

Balance Sheet

Current assets $1,500 Current liabilities $ 910
Fixed assets 7,000 Long-term liabilities 1,200
8,500 Common stock
(at par) 2,000
Paid in capital 1,000
Retained earnings 3,390

Income Statement

Net sales $ 12,750
Cost of sales 7,650
Gross margin $ 5,100
Operating expenses 3,165
Earnings before interest and taxes 1,935
Interest 235
Earnings before tax $1,700
Taxes (40%) 680
Earnings after tax $1,020

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