Return on Equity Is a Profitability Ratio Calculated by Dividing

question 25

True/False

Return on equity is a profitability ratio calculated by dividing net income by average common stock equity.If the firm issues preferred stock,the dividends paid to preferred shareholders are subtracted from net income.

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Definitions:

Average Total Cost

The total cost of production divided by the quantity of output produced, it includes all variable and fixed costs.

Fixed Capital

Long-term assets used in production, such as buildings, machinery, and equipment, which are not easily converted into cash.

Marginal Cost

The additional expenditure resulting from the production of an extra unit of a product or service.

Average Total Cost

The total costs of production (both fixed and variable costs) divided by the quantity of output produced, indicating the cost per unit of output.