Which one of the following statements is correct? Pre-tax return on shareholders' equity is calculated as:
A)Operating profit as a percentage of share capital plus retained earnings.
B)Profit after taxation as a percentage of share capital plus retained earnings.
C)Profit before taxation as a percentage of share capital plus retained earnings.
D)Operating profit as a percentage of the total of share capital plus retained earnings.

Question

Quizplus · Accepted Answer

Pre-tax return on shareholders' equity is calculated by dividing profit before taxation by the total of share capital plus retained earnings. Option A is incorrect because it uses operating profit instead of profit before taxation. Option B is incorrect because it uses profit after taxation instead of profit before taxation. Option D is incorrect because it only uses share capital instead of the total of share capital plus retained earnings.

Which One of the Following Statements Is Correct? Pre-Tax Return