Dividends to Preferred Stockholders Are Deducted from Net Income When

question 186

Multiple Choice

Dividends to preferred stockholders are deducted from net income when calculating the return on common stockholders' equity ratio because

• A)dividends are not an expense on the income statement.
• B)the ratio is an indicator of the return on "common" stockholders' equity,not the return on preferred stock.
• C)dividends are only available for distribution to common stockholders.
• D)conservatism indicates that shareholders prefer a smaller numerator.

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