ABSTRACT

                         In traditional method of computing the final results, compensation to labour and management is charged to profit and loss account. Cost of debt is also charged to the profit and loss account. Only the cost of equity capital is ignored. But in reality equity capital is scarce and has an opportunity cost, just as any factor of production. Yet traditional measures like ROI i.e. Return on investment, EPS i.e. Earning per share and Net Income does not account for the cost of equity capital.