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I have seen the following term in encoder connections.
. The signal number 5 in encoder refers to +5Vs (rtn). Does it mean a Gnd? Why did he not say Gnd? Any specific reason.
As you know,the Gnd form the return signal path.
which carries the common return signal related to the specified block.
Mixing different returns without knowing grounding guidelines will generate interference in unwanted blocks.
That is why there is a return path for each block in your figure for each connector P1,P2 and P3 as Vs(rtn),+5v(rtn)...
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