Return on Shareholders Funds (ROSF) Ratio

Definition: The Return On Shareholders Funds (ROSF) ratio is a measure of the profit for the period which is available to the ordinary shareholders with the ordinary shareholders' stake in a business.

Formula:
Return On Shareholders Funds = ((Net profit after taxation & preference dividend) / (Ordinary share capital + Reserves)) * 100%

Example 1:
If the net income of PPC Ltd is $80,000 whereas shareholder's funds are $500,000. Then, the ROSF = (80,000 / 500,000) * 100% = 16%

Example 2:
Calculate the ROSF for Silvers plc, given the following data:
Net profit before tax $200,000
Corporation tax $20,000
Ordinary shares $310,000
General reserve $40,000
Retained profits $50,000
10% Debentures $180,000

Solution:
Net profit after taxation = 200,000 - 20,000 = $180,000
Ordinary share capital plus reserves = 310,000 + 40,000 + 50,000 = $400,000
ROSF = (180,000 / 400,000) * 100% = 45%

* Next: Return on Net Assets (RONA) Ratio Analysis

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