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Return on Stockholders Equity

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Utilizing the following information on the Arnold Company, compute the firm's return on equity. (Be sure to separate the ROE into its three component ratios)

Balance Sheet
(000s)

Current assets $1500 Current Liabilities $910
Fixed assets $7000 Long-term liabilities $1,200
_____ Common Stock (at par) $2,000
Paid in capital $1,000
Retained earnings $3,390
______
$8,500

Income Statement
(000s)

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
Earning before tax $ 1,700
Taxes (40%) 680
Earnings after tax $ 1,020.

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Solution Summary

An examination of the return on stockholders equity is given.

Solution Preview

See attachment.
Return on net total
Stockholders' = profit x asset x equity
Equity margin turnover multiplier

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