The numerator of the rate earned on common stockholders' equity ratio is equal to
A) net income
B) net income minus preferred dividends
C) income before income tax
D) operating income minus interest expense

Question

Quizplus · Accepted Answer

The numerator of the rate earned on common stockholders' equity ratio is net income minus preferred dividends. This is because preferred dividends belong to preferred stockholders, not common stockholders. Therefore, the ratio only considers the earnings available to common stockholders.

The Numerator of the Rate Earned on Common Stockholders' Equity