###
**CFA Practice Question**

An analyst has extracted the following information from the financial statements of Myco:

What is the return on equity for Myco?

A. 14.85%

B. 22.85%

C. 9.65%

**Explanation:**ROE = Net income / Equity = [0.65 x 1,298] / [3,086 + 5,653] = 0.0965, or 9.65%

###
**User Contributed Comments**
9

User |
Comment |
---|---|

Kuki |
dont think too much..the answer might be simpler than you think. I broke my head trying to figure out the answer using DUPONT analysis. |

felixd |
so did I. I think this is very good advice for the entire CFA exam. When several solutions are possible it is most likely the simlest one |

ml42085 |
occam's razor |

mattg |
Good advice, I'll try to keep it in mind :) |

gill15 |
Why is Div paid not apart of Calc. If: OE = contributed capital + End Retained earnings OE = 3086 + Beg Retained Earnings(5653) - DIV(274) OE = 8465 should be used. Or is the 5653 given End retained earnings? How would you know if its beg or end. Confused. |

oregan |
Dividends paid are already included in the net income, gill15. |

clipp |
^^^ incorrect, dividends are paid out of retained earnings and are after tax distributions. |

davcer |
Before aplying the dupont method be sure that NI and Equity are missing, otherwise you will do unnecessary calculations |

cfastudypl |
Attempting to use the Dupont analysis or model when all the data for a direct NI/Equity calculation are given is time killing. Kuki's thought above is quite instructive. |