What term describes the earnings available to common and preferred stockholders?

The term that describes the earnings available to both common and preferred stockholders is net income. Net income represents the total profit of a company after all expenses, including operating expenses, interest, taxes, and other non-operating expenses, have been deducted from total revenue. It reflects the amount available to distribute to shareholders in the form of dividends or reinvestment back into the business. Since this amount encompasses earnings after all obligations are settled, it is the figure that stockholders, especially common and preferred ones, look at when assessing their potential returns on investment. This makes net income crucial for evaluating a company’s profitability and financial health.

In contrast, operating income focuses on the earnings generated from core business operations before interest and taxes, while gross profit measures revenue after only deducting the cost of goods sold. Earnings before taxes, as the name suggests, represent profits before tax expenses are considered. Therefore, among the provided options, net income is the most comprehensive measure of earnings that reflects the profit available to shareholders.