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The numerator of the return on common stockholders' equity is net income minus preferred dividends.
Option d
<u>Explanation:</u>
Return on common stockholders' equity which is also named as return on equity (ROE) ratio evaluates the accomplishment of a company in resulting income for the benefit of common stakeholders.
<em>Use of return on equity:</em>
- Isolates common equity returns
- Can be used to evaluate dividends
- Evaluates the use of capital by the management
It is calculated by income available for stockholders divided by the total number of common stock and is expressed or represented in percentage. Income available for common stockholders can be arrived by reducing preference dividends from Net income.
That is,
Hence, net income minus preferred dividends is the right answer.
