Return on Equity

Return on Equity Ratio  = Net Profit After Tax - Preference Dividend x 100
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                                        Equity Capital
Earnings per Share Ratio = Net Profit After Tax - Preference Dividend
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                                  Number of Equity Shares

This ratio is of importance to equity shareholders to finally judge the effectiveness of management in running the business. It is the quantum of profit available to the equity shareholders in the form of dividend. It is equally important to prospective investors as their judgement for investment.

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