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Retained earnings
Completed Percentage
Year contract completion
1990 ($271,603) $147,885
1991 (366,386) 559,711
1992 585,554 786,282
The value of petitioner's stock increased as its retained
earnings increased.
H. Return on Equity
Using the percentage of completion method, petitioner's
return on equity (net profits; i.e., profits less taxes and
compensation of the CEO, divided by equity) was about 37 percent
for 1990, 75 percent for 1991, and 25 percent for 1992.
Under the completed contract method, petitioner's return on
equity was about 2,665 percent for 1992. Petitioner's average
return on equity for 1990, 1991, and 1992 was 45.4 percent under
the percentage of completion method of accounting and 842 percent
under the completed contract method. Petitioner paid $10,000 in
dividends ($1 per share) on June 30, 1992.
I. Reynolds
Construction businesses are generally required to have a
surety bond for the amount of the contract as a condition for
submitting a bid and entering a contract. Robert N. Reynolds
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