The following data came from the financial statements of the Cheviot Company:

Revenue

$1,800,000

Assets

$1,200,000

Expenses

1,200,000

Liabilities

200,000

Net income

600,000

Equity

1,000,000

Compute the return on equity.

A ) 50%

B) 60%

C) 30%

D) 40%

ANSWER: $600,000 / $1,200,000 = 60%

----- I understand that the formula

Return on Equity = Net Income / Stockholders' Equity, but where is $1,200,000 from?