20 October, 17:27

# Use the following information to answer this question. Windswept, Inc. 2017 Income Statement (\$ in millions) Net sales \$ 9,200 Cost of goods sold 7,550 Depreciation 430 Earnings before interest and taxes \$ 1,220 Interest paid 92 Taxable income \$ 1,128 Taxes 395 Net income \$ 733 Windswept, Inc. 2016 and 2017 Balance Sheets (\$ in millions) 2016 2017 2016 2017 Cash \$ 200 \$ 235 Accounts payable \$ 1,370 \$ 1,505 Accounts rec. 950 850 Long-term debt 1,050 1,315 Inventory 1,620 1,625 Common stock 3,200 2,950 Total \$ 2,770 \$ 2,710 Retained earnings 510 760 Net fixed assets 3,360 3,820 Total assets \$ 6,130 \$ 6,530 Total liab. & equity \$ 6,130 \$ 6,530 What is the return on equity for 2017?

+1
1. 20 October, 18:22
0
19.76%

Explanation:

The computation of the return on equity is shown below:

Return on equity = net income : total stockholder equity

where,

Net income is \$733

And, the total stockholder equity is

= Common stock + retained earning

= \$2,950 + \$760

= \$3,710

So, the return on equity is

= \$733 : \$3,710

= 19.76%

We simply applied the above formula