Return on common shareholders' equity is a ratio that
A)is calculated by dividing net income plus preferred dividends by average common shareholders' equity.
B)shows the relationship between net income available for common shareholders and average common shareholders' equity.
C)cannot be calculated if the company has preferred shares in addition to common shares.
D)is calculated by dividing net income plus preferred dividends by average common shareholders' equity and shows the relationship between net income available for common shareholders and average common shareholders' equity.

Question

Quizplus · Accepted Answer

Return on common shareholders' equity shows the profitability from the perspective of common shareholders, calculated by dividing net income available for common shareholders (net income minus preferred dividends) by average common shareholders' equity.

Return on Common Shareholders' Equity Is a Ratio That