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A corporation has annual sales of $10 million, total assets of $5 million, a debt ratio of 40%, depreciation expense of $200,00 and a tax rate of 30%. The corporation's total stockholders' equity is equal to:

A)$3,000,000
B)$3,560,000
C)$12,000,000
D)$2,100,000

2007-06-30 08:31:39 · 3 answers · asked by Anonymous in Business & Finance Investing

3 answers

They are trying to trick you with too much information.
Answer is $3M A)

We are taking your test for you. You better understand the answers! ;-)

2007-07-04 06:48:53 · answer #1 · answered by CommonCents 4 · 0 0

Assets minus debt = stockholders equity.

Assets = 5 million
Debt = 2 million (40% of total assets if that is the ratio)
SE = 3 million or A)

The rest of the stuff is on the P&L statement

2007-06-30 15:37:43 · answer #2 · answered by Anonymous · 1 0

You are tossing out things that have nothing to do with equity.
Equity is the difference between assets and liabilities so you don't need to know sales or expenses or tax rate.
The only info you need it assets are 5 million and debt is 40% of 5 million so 60% of 5 million is equity. So A is the answer.

2007-06-30 15:38:04 · answer #3 · answered by shipwreck 7 · 0 0

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