Since common stockholders are the true owners, preferred stockholders' dividends are deducted from net income before computing _____.
A) the debt ratio
B) the current ratio
C) return-on-equity
D) earnings per share

Question

Quizplus · Accepted Answer

Preferred stockholders' dividends are deducted from net income before computing return-on-equity because return-on-equity measures the profitability relative to common shareholders, and preferred dividends are not available to common shareholders.

Since Common Stockholders Are the True Owners, Preferred Stockholders' Dividends