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What is Return on Shareholder's funds? What does it show?
Return on Shareholders’ Funds is one of the ratios of overall profitability group, which indicates the profitability of a firm in relation to the funds supplied by the shareholders or owners. This ratio is very important from the owner’s point of view as it helps the firm to know whether the firm has earned enough returns to repay its shareholders or not. This ratio is calculated in two ways:
Formula to calculate Return on Shareholders Funds = (Net profit after taxes / Total shareholders' funds) X 100
Formula to calculate Return on Shareholders Funds = {(Net profit after taxes - Preference dividend)/ Shareholders' funds} X 100
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