For calculating RoE, why net worth is taken as base and not shareholders fund – preference capital, since net worth shall also include preference share capital and reserves and surplus?
Also what does net worth consist of?
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Net worth consists of Equity share capital and Reserves and surplus. Preference share capital is not included in net worth. On the contrary, shareholders’ funds include both, equity capital as well as preference share capital along with reserves and surplus.
Hope you understood.
So sir other shareholders fund includes reserves and surplus.
And share capital includes shareholders fund + other shareholders fund?
Here shareholders fund is equity + preference?