The return on common stockholders' equity measures
A)How well operations have provided funds to common stockholders.
B)How well the funds provided by common stockholders have been used to generate a return for the company.
C)How well the funds provided by common stockholders have been converted to cash.
D)How liquid a company is.

Question

Quizplus · Accepted Answer

The return on common stockholders' equity measures how well the funds provided by common stockholders have been used to generate a return for the company. It is a profitability ratio that shows how efficiently a company is using its equity to generate profits. It is calculated by dividing net income by average common stockholders' equity.

The Return on Common Stockholders' Equity Measures