Question

The numerator of the return on common stockholders' equity is Select one: a. net income b. net income minus preferred dividends c. income before income tax d. operating income minus interest expense

Answer 1

Answer:

b. net income minus preferred dividends

Explanation:

The Income associated with the stockholders is Net income after paying preferred dividend, if there is any. Preferred Stockholders are given priority over common stockholders and paid dividend first due to their nature of investment. The Residual value is distributed between common stockholders. So The numerator of the return on common stockholders' equity is net income minus preferred.