Return on common stockholders' equity is most closely related to
A) gross profit rate and operating expenses to sales ratio.
B) profit margin and free cash flow.
C) times interest earned and debt to stockholders' equity ratio.
D) return on asset and leverage (debt to assets ratio).

Question

Quizplus · Accepted Answer

Return on common stockholders' equity is a measure of the profitability of the company for its shareholders. It is calculated as net income divided by average common stockholders' equity. Given that common stockholders' equity is a subset of total assets, return on common stockholders' equity is closely related to return on assets. Additionally, leverage (debt to assets ratio) can impact return on common stockholders' equity, as a company with a higher proportion of debt may have lower equity, which could affect the return for shareholders.

Return on Common Stockholders' Equity Is Most Closely Related to