Return on Equity Is a Ratio That

question 96

Multiple Choice

Return on equity is a ratio that:

• A)is calculated by dividing profit plus preferred dividends by average common shareholders' equity.
• B)cannot be calculated if the company has preferred shares in addition to common shares.
• C)is calculated by dividing profit plus preferred dividends by average common shareholders' equity and shows the relationship between profit available for common shareholders and average common shareholders' equity.
• D)shows the relationship between profit available for common shareholders and average common shareholders' equity.

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Definitions:

Government Purchases

Spending by the government on goods and services that are directly consumed or invested in by the government sector.

Short-Run Aggregate Supply

The total production of goods and services in an economy at different price levels in a short time frame, assuming that some production costs remain fixed.

Spending Multiplier

The ratio of a change in national income to a change in government spending that causes it, indicating the impact of fiscal policy on the economy.

Long Run

A period of time in economics where all factors of production and costs are variable, and all market adjustments have been made.