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
Longminus
term 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 Table

4minus

?1,

assuming that no preferred dividends were? paid, the return on common equity is

A.- 44.86%.

B.- 17.56%.

C- 55.15%

D- 38.83%