When computing the return on common stockholders' equity, preferred stock dividends are subtracted from net income.

Name: When computing the return on common stockholders' equity, preferred stock dividends are subtracted from net income.
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Preferred stock dividends are paid to preferred stockholders, not common stockholders. Therefore, they are subtracted from net income when calculating the return on common stockholders' equity.

When Computing the Return on Common Stockholders' Equity, Preferred Stock