Question

When a company has both common and preferred stock, its ROE must be adjusted by ______. (Select all that apply.)

Answer 1

When a company has both the common and preferred stock, then, its ROE must be adjusted by subtracting the preferred stock balance from the total stockholders' equity  and subtracting preferred stock dividends from net income.

The ROE means Return on equity.

Return on equity is used to measure the profitability of a business in relation to its equity.

If the company have common and preferred stock, then, its ROE must be adjusted by subtracting the preferred stock balance from the total stockholders' equity  and subtracting preferred stock dividends from net income.

Therefore, the Option A and C is correct.

Missing options includes "A) subtracting the preferred stock balance from the total stockholders' equity, B) adding the preferred stock dividends to net income, C) subtracting preferred stock dividends from net income , D) adding the preferred stock balance to total stockholders' equity"

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