Return on Equity Is a Ratio That

question 38

Multiple Choice

Return on equity is a ratio that:

• A) is calculated by dividing profit plus preferred dividends by average common shareholders' equity and shows the relationship between profit available for common shareholders and average common shareholders' equity.
• B) shows the relationship between net earnings and average shareholders' equity.
• C) cannot be calculated if the company has preferred shares in addition to common shares.
• D) is calculated by dividing profit plus preferred dividends by average common shareholders' equity.

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Definitions:

Pure Competition

A market structure characterized by a large number of small firms, a homogeneous product, and easy entry and exit from the market.

Nonprice Competition

A marketing strategy where companies attract customers through methods other than price, such as quality of product, service, or brand image.

Pure Competition

A market condition characterized by a large number of small firms, identical products, and free entry and exit, leading to price-taking behavior.

Product Differentiation

A marketing strategy that businesses use to distinguish their products from similar offerings on the market.