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Hello,
I have a small doubt and I really appreciate if you could clarify it for me.
I am studying F3 through Kaplan and as per the formula to calculate ROE, equity is the book value of shareholders’ funds.
But the CH 1 TUY 19 answer ( page 61) says that EPS uses the number of shares and not the value of them .
Which one is correct? I am confused.Thank you in advance!
Hi,
You are looking at two separate calculations. EPS and ROE are different. EPS looks at the earnings made this year for each share owned, hence dividing by the weighted average number of shares.
The return on equity is looking at the return on the book value of equity and not the number of shares held.
Thanks
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