Overall Gain and Shareholders' Equity Analysis for East Point Retail, Inc.
What is the formula to calculate the rate earned on stockholders' equity held by common stockholders on average for East Point Retail, Inc.?
The rate earned on stockholders' equity held by common stockholders on average is calculated by dividing the net income by the average stockholders' equity, and then multiplying by 100. For Fiscal Year 3, the calculation is as follows: ($132,300 / $1,050,000) x 100 = 12.6%. For the 2nd fiscal year, the average stockholders' equity is $896,053, and the rate on shareholders' equity is 7.6%.
Understanding Rate Earned on Stockholders' Equity
The rate earned on stockholders' equity is an important metric that indicates the profitability of a company in relation to the equity invested by common stockholders. In the case of East Point Retail, Inc., the calculation for this rate helps investors and stakeholders to evaluate the company's performance and efficiency in utilizing shareholders' equity.
By calculating the rate earned on stockholders' equity, investors can assess how well the company is generating returns on the equity invested by common stockholders. A higher rate indicates that the company is utilizing shareholders' equity effectively to generate profits, while a lower rate may raise concerns about the company's financial health and profitability.
For East Point Retail, Inc., the rate earned on stockholders' equity for Fiscal Year 3 is 12.6%, which signifies that the company is able to generate a return of 12.6% on the average stockholders' equity held by common stockholders. This indicates a favorable performance in utilizing the equity capital to generate profits for shareholders.
On the other hand, the rate on shareholders' equity for the 2nd fiscal year is calculated to be 7.6%, which is slightly lower than the rate for Fiscal Year 3. This may indicate a decrease in the profitability or efficiency of utilizing shareholders' equity during that period.
Overall, analyzing the rate earned on stockholders' equity provides valuable insights into the financial performance and management of equity capital by East Point Retail, Inc. Investors and analysts can use this information to make informed decisions regarding their investments in the company.