Dividing the net profit by the paid up amount of equity share capital yields ........

Accountancy (Phase -I & II) Accounting for Shares

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Dividing the net profit by the paid up amount of equity share capital yields __ .

Temporary investment

Earning per share

Rate of return on equity share capital

None of the above

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Explanation:

The rate of return required is based on the level of risk associated with the investment. A firm that has earned a return on equity higher than its cost of equity has added value. The stock of a firm with a 20% ROE will generally cost twice as much as one with a 10% ROE (all else being equal).