When Calculating the Return on Common Equity Ratio,why Are Dividends

question 62

Multiple Choice

When calculating the return on common equity ratio,why are dividends to preferred shareholders deducted from net income?

• A) because the ratio is an indicator of the return on common shareholders' equity rather than the return on total equity
• B) because dividends are not expenses on the current period income statement
• C) because conservatism indicates that shareholders prefer a smaller numerator
• D) because dividends are only available for distribution to common shareholders after the preferred shareholders have received their dividends

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Definitions:

Telegraphic Speech

A stage in early child language development characterized by two-word sentences that express essential ideas, resembling the succinctness of a telegram.

Prelinguistic Speech

Vocalizations made by infants before they acquire language, including crying, cooing, and babbling.

Fundamental Communication

Basic and essential forms of interaction that enable understanding and expression between individuals, such as speaking, listening, and non-verbal cues.

Syntax

The set of rules in a language that dictates how words and phrases are arranged to create meaningful sentences.