Formula
to calculate return on common equity:
Return
on Common equity =
(net profit
- preferred share dividends) /
(shareholders equity- preferred shares).
Return
on common equity ratio definition and
explanation:
The
return on common equity
ratio shows the return to
common stockholders after factoring out preferred shares.
A return of over 10% indicates enough
to pay common share dividends and retain funds for
business growth.
The return on assets ratio is listed in our profitability
ratios.
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