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%.