FRReturnOnCommonEquity (NetProfit, PreferredDividend, CommonEquity)

Basic and Crystal syntax.

Format

FRReturnOnCommonEquity(NetProfit, PreferredDividend, CommonEquity)

Arguments
Action

FRReturnOnCommonEquity returns the ratio between the net profit distributable to common shareholders (NetProfit-PreferredDividend) and CommonEquity (for example, ReturnOnCommonEqutiy = (NetProfit - PreferredDividend) / CommonEquity).

Typical uses

This ratio is used to measure the return on common equity employed. Note that preferred dividend is deducted prior to doing the calculation. The higher the result the higher the return.

Examples

The following examples are applicable to both Basic and Crystal syntax:

FRReturnOnCommonEquity(340, 40, 600)

Returns 0.5.

FRReturnOnCommonEquity(245, 50, 150)

Returns 1.3.

Note:    

Comment

FRReturnOnCommonEquity is one of the many financial analysis tools used in interpreting the financial position of a company. As in the case of all ratios, it has to be used with caution. It can just be used as a clue and not solid proof for forming a judgment on the financial status of a company.

Neither one of the ratios can be used alone for doing financial analysis and there are no fixed rules on the results of the ratios. Apart from differences between type of industries, result varies among different companies within the same industry and within different account periods. The results should only be used for relative comparison and trend analysis, rather than treating them as something absolute.



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