Which of the following is the formula for computing the rate of return on common stockholders' equity?
A)(Net income + interest expense)/ average total assets
B)Net income / net sales
C)(Net income - preferred dividends)/ average common stockholders' equity
D)(Net income - preferred dividends)/ number of shares of outstanding common stock

Question

Quizplus · Accepted Answer

The formula for computing the rate of return on common stockholders' equity is (Net income - preferred dividends)/ average common stockholders' equity. This formula calculates the amount of profit earned by the company for each dollar invested by its common stockholders. Option A calculates the return on assets, Option B calculates the profit margin ratio, and Option D calculates the earnings per share. Therefore, the correct answer is C.

Which of the Following Is the Formula for Computing the Rate