Rate on Equity Calculation for 2024
What is the rate on equity for 2024?
What is the formula to calculate the rate on equity?
Rate on Equity Calculation for 2024
The rate on equity for 2024 is 25.1%.
To calculate the rate of equity, we need to divide the net income by the average total equity. The formula for the rate on equity is net income divided by average total equity. Here's the detailed calculation:
First, we need to calculate the average total equity:
Equity in 2024: Preferred Shares + Common Shares + Retained Earnings
Preferred Shares = $78,600
Common Shares = $305,000
Retained Earnings = $315,400
Equity in 2024 = $78,600 + $305,000 + $315,400 = $699,000
Equity in 2023: Preferred Shares + Common Shares + Retained Earnings
Preferred Shares = $78,600
Common Shares = $305,000
Retained Earnings = $233,400
Equity in 2023 = $78,600 + $305,000 + $233,400 = $616,000
Now, let's calculate the average total equity:
Average Total Equity = (Equity in 2024 + Equity in 2023) / 2
Average Total Equity = ($699,000 + $616,000) / 2 = $657,500
Next, we can calculate the rate on equity:
Rate on Equity = Net Income / Average Total Equity
Rate on Equity = $165,000 / $657,500 = 0.251 = 25.1%
Therefore, the rate on equity for 2024 is 25.1%.