The Numerator of the Rate of Return on Common Shareholders

question 53

Multiple Choice

The numerator of the rate of return on common shareholders' equity

• A)is the amount of earnings assignable to common shareholders' equity after subtracting all amounts required to compensate other providers of financing for the use of their funds.
• B)subtracts from net income any earnings allocable to preferred stock equity, usually the dividends on preferred stock declared during the period.
• C)does not subtract the dividends on common stock because such dividends represent distributions to common shareholders of a portion of the returns generated for them during the period.
• D)all of the above
• E)none of the above

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Definitions:

Income Before Taxes

A company's earnings before tax is deducted, an indicator of financial performance excluding tax expenses.

Cash Sales

Transactions where customers pay for goods or services in cash at the point of sale, resulting in immediate revenue.

Credit Sales

Sales made on credit, allowing customers to purchase goods or services and pay for them at a later date.

Loss from Sale

An unfavorable difference between the selling price of an asset and its book value, leading to a financial loss for the entity.