Return on Total Shareholders’ Equity:

Return on Total Shareholders’ Equity:

It is measured by dividing the net profits after taxes(but before preference dividend) by the average total shareholders’ equity.

Shareholders’ equity includes here as follows:

(i) Preference share capital,

(ii) Ordinary shareholders equity consisting of

(a) Equity share capital,

(b) Share premium, and

(c) Reserves and surplus less accumulated losses.

It helps to compare the relative performance and strength of the firm to other firms.