The Rate of Return on Common Stockholders' Equity Is Calculated

question 44

True/False

The rate of return on common stockholders' equity is calculated by dividing net income plus preferred dividends by average common stockholders' equity.

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Definitions:

EAR

Effective Annual Rate, a comprehensive measure of the cost of borrowing on a loan or earning on an investment, taking into account the effect of compounding interest.

APR

Annual Percentage Rate; the annual rate charged for borrowing or earned through an investment, including any fees or additional costs associated with the transaction.

Loan

A sum of money that is borrowed, which must be paid back with interest, typically used for significant purchases, investing, or to cover cash flow shortfalls.

Balloon Loan

A type of loan that has low, fixed monthly payments for a period of time, followed by a large payment for the remaining amount due at the end of the term.