Which of the following statements is true? I. The formula for the return on equity is: Return on equity = Net income ÷ Average total stockholders' equity. II. When computing the return on equity, retained earnings should be excluded from the average total stockholders' equity.

Which of the following statements is true? I. The formula for the return on equity is: Return on equity = Net income ÷ Average total stockholders' equity. II. When computing the return on equity, retained earnings should be excluded from the average total stockholders' equity.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: What item flows from the statement of retained earnings to the balance sheet?a. Cashb. Dividendsc.…

A: Financial Statement: A financial statement is the complete record of financial transactions that…

Q: which of the following ratios indicate the proportion of earnings paid as dividends .a dividends…

A: dividend pay out formula: dividend payout =dividendnet income

Q: Name the two main components of stockholders’ equity. Describe the main sources of change in each…

A: Stockholder’s Equity is the amount of remaining assets if all the liabilities in the business are…

Q: What is basic earnings per share (EPS)?

A: Introduction:- Basic earning per share denotes amount of net profit attributable to each common…

Q: We should report Dividends as:- Select one: a. financing activity-inflow b. financing activity-…

A: Cash flow statement is the summary of inflow and outflows of cash in 3 categories of operating,…

Q: At December 31, 2020, the available-for-sale debt portfolio for Novak Corp. is as follows.…

A: fair value represents the most recent and pertinent assessment of an investment, it is especially…

Q: 1. What does the beginning balance of retained earning indicate? And what does the following that is…

A: Retained earnings are the accumulated earnings of the business that is fully attributable to the…

Q: it of What is considered a summary of profit or loss? Select one: a. Retained earnings b.…

A: The correct answer to the question is "C. Income Statement"Income statement is considered as summary…

Q: Which does not affect total shareholders’ equity? a. Stock dividend b. Scrip dividend c. Cash…

A: The dividend is paid to the shareholders from the retained earnings of the business.

Q: Calculate Ebanks, Inc.'s margin and net income. h. Çalculate Ebanks, Inc.'s return on а. equity.

A: Step 1 Calculation of net income: Calculation of Margin:

Q: What is equity multiplier ? a) Total Assets /Equity b) Equity / Net Sales c) Total Assets / Net…

A: The equity multiplier is a common ratio which is used in accounting and finance analyses. It is…

Q: 19. Which of the following statements relating to earnings per share is not true? __________ It is…

A: Ratio analysis is a technique that is used to gain insight into the organization's profitability,…

Q: Retained earnings, as a form of equityfinancing, area. gross earnings.b. profits before taxes.c.…

A: Equity financing: It is a method to raise money for business operations and growth. Retained…

Q: The calculation of earnings and profits is used primarily to determine, which of the following: O a.…

A: Every company will try to increase the profitability from its operations. The company will earn…

Q: In a financial statement or other financial forms, where do I find or how do I find: Net Income/…

A: Financial Statements are the official or formal records of the financial activities of the business.…

Q: Which statement below is true? Retained earnings unappropriated is shown as part of reserves in the…

A: Accounting policies are the principles rules and practices that are applied by entity in preparing…

Q: Ratios or Percentages Definitions 1. Inventory turnover ratio 2. Dividend yield ratio 3. Return on…

A: Financial ratios enable the standardization of the reporting of a firm's financial performance and…

Q: Which of the following will reduce Retained Earnings? a. Declaration of a stock dividend b. Payment…

A: Retained earnings refer to the part of net income that is left over after paying all the expenses.…

Q: The average of the stockholder's equity was not computed, factored in, nor explained.

A: The average of the stockholder's equity is calculated by taking the average of the current year and…

Q: It is calculated, taking into account the outstanding equity shares of the company A. Conversion…

A: Issue of shares is an important source of finance for the business. Several type of shares can be…

Q: If the revenues are correctly reported and the gross profit of a company is understated, what is the…

A: There would be effect on the retained earnings on stockholders' equity if the gross profit is not…

Q: Which of the following will be subtracted while calculating ending equity under statement of changes…

A: Amount to be subtracted from the value of equity is owners drowning, treasury stock, or buyback of…

Q: 1. Which of the following is not a component of shareholders' equity? a.Loss on sale of equipment…

A: Retained earnings: These are the accumulated earnings of the company. These earnings were…

Q: Which one of the following will increase shareholders' equity, all else held constant? Select…

A: Shareholders/ Owner’s equity: The shareholders are the owners of the company and the shareholders…

Q: Hi. Investment increase Stockholders' Equity. Can you explain me why? How does it relate to…

A: An investment is an asset or item acquired with the goal of generating income or appreciation. In an…

Q: 2.) Compare and Contrast the relationship of the number of shares to the dividend the stockholder…

A: Stockholder is the person who has invested money in the stock of the company. Stockholder gets…

Q: The Statement of Stockholders' Equity includes an adjustment for: a Only Retained Earnings. b…

A: The statement of stockholders' equity can be defined as the statement showing the capital components…

Q: 1. Which of the following would appear first in a statement of retained earnings? Choices; Cash…

A: “Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: difference b/w creditors and stockholders

A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: The two basic sources of stockholders' equity are OA. assets and equity. B. preferred and common. C.…

A: Equity is the contribution of owners' funds in the business. The two main sources of equity are the…

Q: 22. Which of the following is not included on the statement of changes in stockholders’ equity? a.…

A: Statement of changes in stockholders' equity is a part of financial statements to show the changes…

Q: Match the following ratio functions with the ratio (place the number of your chosen answer into the…

A: Ratio analysis: It refers to the quantitative technique of financial analysis that allows gaining an…

Q: Explain how the Du Pont system of analysis breaks down return on assets. Also explain how it breaks…

A: A stakeholder is defined as a "person or group that has an interest in any decision or action of an…

Q: NPAT Less prefernce dividend is used in O a. Return on Equity O b. Return on Equity share…

A: A financial ratio is one of the important tools for analyzing a company’s financial statement. There…

Q: (a) Why is the EPS (earnings per share) figure useful to the users of general purpose financial…

A: General Purpose Financial Reporting The purpose issuing the general purpose financial reporting to…

Q: Sales revenue is reported in the stockholder’s equity section of the balance sheet? True/false

A: Sales revenue: Revenue generated from the sales called sales revenue. Sales revenue = selling price…

Q: Which of the following does not appear in a statement of retained earnings? Choices; Net loss…

A: Retained earnings is the amount of earnings collected or accumulated over the period of time.…

Question

Which of the following statements is true?
I. The formula for the return on equity is: Return on equity = Net income ÷ Average total stockholders' equity.
II. When computing the return on equity, retained earnings should be excluded from the average total
stockholders' equity.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Define equity:

VIEW

Step 2: Solution:

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

I’m trying to do the debt to equity ratio. I understand that is total liabilities divided by stockholders equity. What would be my liability for the equation? Accounts receivable Inventory Net sales Cost of goods sold Total assets Total stockholders equity Net income
. How does the issuance of common stock affect the accounting equation? a) Increases assets and decreases liabilities b) Increases assets and increases equity c) Increases assets and increases liabilities d) Increases liabilities and decreases equity
Why does the equity method record dividends from an investee as a reduction in the investment account, not as dividend income?
1. What percentage of total liabilities and stockholders’ equity is stockholders’ equity? What kinds of stock does the company have?
Explain why stockholders’ equity is increased by revenuesand decreased by expenses.
Can you help me with #11-#13?
Why would a company’s return on total assets be different from its return on common stockholders’ equity?
Which of the following is the correct Basic Accounting Equation Oa ASSET + LIABILITIES= STOCK HOLDER'S EQUITY O b. ASSET= LIABILITIES + STOCK HOLDER'S EQUITY C LIABILITIES =ASSETS + STOCK HOLDER'S EQUITY Od ASSETS =LIABILITIES
The proportion of profits distributed as dividends is called the and the retained proportion of profits is known as Oa Solvency ratio, retention ratio Ob. Solvency ratio, liquidity ratio C Dividend payout ratio, retention ratio D Dividend payout ratio, interest coverage ratio
Earnings per share is a factor used to determine dividends. Select one: True False
TRUE OR FALSE?The total retained earnings can be declared as dividends.
Earnings per share is a profitability ratio measuring how much a furm earns per share of common stock outstanding. True False