Return on Equity Ratio
This ratio throw light on the performance and strength of the firm and reveals how profitability. The owners fund have been utilised by the firm. It also gives the shareholders an idea of the return on their funds. Profitability is measured by dividing the net profit after tax (but before preference dividend) by the average total share holders equity. The ideal return on equity is about 13%.
Return on Equity Ratio =
Net Profit after tax / Net worth * 100
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