The rate earned on total common stockholders' equity for most thriving businesses will be less than the return on total assets.

Question

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The rate earned on total common stockholders' equity for most thriving businesses will be higher than the return on total assets. This is because common stockholders' equity represents the amount of money the shareholders have invested in the business, while total assets include all of the resources used to generate income, including debt financing. Therefore, the rate earned on common stockholders' equity is a better measure of the profitability of the shareholders' investment than the return on total assets.

The Rate Earned on Total Common Stockholders' Equity for Most