Rona
jewels.p
Registered Posts: 1,774 Beyond epic contributor ๐งโโ๏ธ
I remember when I was learning DFS Vic and a few others mentioned a Ratio called RONA that they were struggling with. I have never seen this ratio anywhere in my MAC book is it a ratio I need to learn or is it only for PEV and PCR?
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I assume that RONA stands for Return on Net Assets, also known as Return on Equity (ROE).
Essentially it is the relationship between profits and share capital (ie. How much profit is earned, and therefore available to pay a dividend, per ordinary share).
Preference share holders aren't concerned with profits particularly as they are paid a fixed amount, so the share capital element of the ratio is based on ordinary shares only.
Similarly, the profit element of the ratio is profit after tax and preference share dividends, as this is the amount available for distribution to ordinary shareholders.
You can probably guess the formula from what I've said already, but here it is anyway, just for clarity:-
ROE (or RONA) = net profit after tax and pref share divs รท no of ordinary shares in issue
It can also be calculated to give profits earned per ยฃ of equity, rather than per share (these may not be the same thing if the shares have a nominal value of say ยฃ0.50) by replacing the last part of the formula with the nominal value of ordinary shares in issue.
All that said, I don't remember it ever being examinable in AAT............
Hope that helps.
Andy0 -
Thanks for that Andy0
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It is in DFS, I remember having to learn it...0
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Has ok let me check when I get home :-p0
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Right i've found it in my PEV/PCR/MAC notes....
Page 133 since you have them...0 -
OK you're right it's not in the DFS notes..0
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