A formula such as net income available to common stockholders divided by common equity is used to calculate __________?
Correct answer: C. return on common equity
- A. return on earnings power
- B. return on investment
- C. return on common equity
- D. return on interest
Explanation
Net income available to common shareholders divided by common equity measures the return earned on the owners’ invested equity. This is called return on common equity, or return on equity.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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