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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Definitions:

Creatine Phosphokinase

An enzyme found in the heart, brain, and skeletal muscle that plays a key role in the energy storage and utilization processes.

Oxygen-poor Blood

Blood that has delivered its oxygen to the tissues of the body and is returning to the lungs to be reoxygenated.

Pulmonary Valves

Heart valves located at the opening of the pulmonary artery that prevent backflow of blood into the right ventricle.

Aortic Valves

The valve in the heart that controls blood flow from the left ventricle into the aorta.