The numerator of the rate of return on common shareholders' equity
A)is the amount of earnings assignable to common shareholders' equity after subtracting all amounts required to compensate other providers of financing for the use of their funds.
B)subtracts from net income any earnings allocable to preferred stock equity, usually the dividends on preferred stock declared during the period.
C)does not subtract the dividends on common stock because such dividends represent distributions to common shareholders of a portion of the returns generated for them during the period.
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

The numerator of the rate of return on common shareholders' equity includes all the elements described in options A, B, and C. It accounts for earnings assignable to common shareholders after compensating other financing providers (A), subtracts earnings allocable to preferred stock (B), and does not subtract dividends on common stock since those are distributions to the shareholders (C).

The Numerator of the Rate of Return on Common Shareholders