The Numerator of the Rate Earned on Common Stockholders' Equity

question 137

Multiple Choice

The numerator of the rate earned on common stockholders' equity ratio is equal to

• A) net income
• B) net income minus preferred dividends
• C) income before income tax
• D) operating income minus interest expense

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Definitions:

Baker's Wages

The compensation paid to individuals who are employed to bake goods, usually considered a variable cost in the production process.

Direct Labor

The workforce directly involved in manufacturing goods or providing services, whose wages are considered part of the cost of goods sold or cost of services.

Factory Overhead

The total indirect costs associated with manufacturing, excluding direct labor and direct materials.

Direct Materials

Raw materials that can be directly attributed to the production of finished goods in a manufacturing process.