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return on common stock equity

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Financial Dictionary

return on common stock equity

A measure of the return that a firm's management is able to earn on common stockholders' investment. Return on common stock equity is calculated by dividing the net income minus preferred dividends by the owners' equity minus the par value of any preferred stock outstanding. For firms with no preferred stock, return on common stock equity is identical to return on equity. Compare profitability ratio.

Wall Street Words: An A to Z Guide to Investment Terms by David L. Scott.
Copyright © 2003. Published by Houghton Mifflin.
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