A company's return on equity (ROE) is 18%. If its net income is $90,000, what is its average shareholders' equity? Question 11Answer A. $550,000 B. $500,000 C. $450,000 D. $600,000

Return on Equity (ROE) can be calculated using the formula: \[ ROE = \frac{\text{Net Income}}{\text{Average Shareholders' Equity}} \] Given that ROE is 18% (or 0.18) and the net income is $90,000, we can rearrange the formula to solve for average shareholders' equity: \[ \text{Average Shareholders' Equity} = \frac{\text{Net Income}}{ROE} \] Now, substituting in the given values: \[ \text{Average Shareholders' Equity} = \frac{90,000}{0.18} = 500,000 \] Thus, the average shareholders' equity is $500,000. The correct answer is: **B. $500,000**