GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Rate of return on equity share capital
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Temporary investment
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Earning per share
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None of the above
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Detailed explanation-1: -Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders’ equity.1 Because shareholders’ equity is equal to a company’s assets minus its debt, ROE is considered the return on net assets.
Detailed explanation-2: -Return on equity = Net income / Average shareholder’s equity. Here, net income is computed before dividends are allocated to the common shareholders. Further, it is calculated after dividends are paid out to preferred shareholders, and interest is paid to lenders.
Detailed explanation-3: -What is Earnings per share (EPS) Definition: Earnings per share or EPS is an important financial measure, which indicates the profitability of a company. It is calculated by dividing the company’s net income with its total number of outstanding shares.
Detailed explanation-4: -It is calculated by dividing earnings after taxes (EAT) by equity in common shares, with the result multiplied by 100%. The higher the percentage, the greater the return shareholders are seeing on their investment.