Return on equity is a ratio that: O A. cannot be calculated if the company has p

Question

Return on equity is a ratio that: O A. cannot be calculated if the company has preferred shares in addition to common shares O B. is calculated by dividing net income plus preferred dividends by average common shareholders' equity O C. shows the relationship between net income available for common shareholders and average common shareholders' equity O D. is cakculated by dividing net income plus preferred dividends by average common shareholders' equity and shows the relationship between net income available for common shareholders and average common shareholders' equity

Explanation / Answer

1.

C. Return on equity shows the relationship between net income available for common stockholders and average common shareholders' equtiy.

2. False, because outstanding shares represents the number of shares issued or sold to investors from the available authorized shares. Only authorized shares represents the maximum number of shares a corporation allowed to distribute to shareholders.

3. A. Current market value times the number of shares to be issued.

4. B. Outstanding shares

5. B. Repurchasing shares shrinks the company's assets and equity.

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