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Question: Stewart Company Balance Sheet Assets: ...

Stewart Company

Balance Sheet

Assets:
Cash and marketable securities		$600,000
Accounts receivable		900,000
Inventories		1,500,000
Prepaid expenses		75,000
Total current assets		$3,075,000
Fixed assets	8,000,000
Less: accum. depr.	(2,075,000)
Net fixed assets		$5,925,000
Total assets		$9,000,000
Liabilities:
Accounts payable		$800,000
Notes payable	700,000
Accrued taxes		50,000
Total current liabilities		$1,550,000
Longminusterm debt		2,500,000
Owner's equity (1 million shares of common stock outstanding)		4,950,000
Total liabilities and owner's equity		$9,000,000
Net sales (all credit)		$10,000,000
Less: Cost of goods sold		(3,000,000)
Selling and administrative expense		(2,000,000)
Depreciation expense		(250,000)
Interest expense		(200,000)
Earnings before taxes		4,550,000
Income taxes		(1,820,000)
Net income		$2,730,000

Based on the information in the Table, assuming that no preferred dividends were paid, the return on common equity is

A. 38.83%.

B. 55.15%.

C. 17.56%.

D. 44.86%.