Return on Shareholders “Funds”: In case it is desired to work out the profitability of the company from the shareholders point of view, it should be computed as follows:

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Net Profit after interest & tax

—————————————-  x  100

Shareholders’ Funds

 

The term Net Profit here means “Net Incomes after Interest & Tax” It is different from the “Net Operating Profit” Which is used for computing the “Return on Total Capital Employed” in the business. This because the shareholders are interested in Total Income after Tax including Net Non-operating Income (i.e., Non-operating Income – Non-operating Expenses)

 

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