Question

Which ONE of the following formulae is NOT​ correct? A. Dividend cover ratio​ = 1/Dividend payout...

Which ONE of the following formulae is NOT​ correct?

A.

Dividend cover ratio​ = 1/Dividend payout ratio

B.

Market share price​ = P/E ratio x Earnings per share

C.

Market share price​ = Dividend per share​ (1-t) x Dividend yield

D.

Earnings per share​ = Dividend per share x Dividend cove

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Answer #1

A. Dividend cover ratio= Earning per share/ dividend per share

Dividend payout ratio= Dividend per share/ Earning per share

Hence Dividend cover ratio= 1/ Dividend payout ratio

ThIs Option is correct

B. pe ratio= Market price per share/earning per share

Hence Market price per share= PE Ratio* Earning per share

Option B is correct

D. Dividend cover ratio= Earning per share/ dividend per share

Hence earning per share= dividend cover ratio* dividend per share

Option D is correct

C. Market share price​ = Dividend per share​ (1-t) x Dividend yield

Dividend yield= Annual Dividend/ Market share price

Market share price= Annual dividend/ Dividend yield

Hence the option is incorrect since divided yield should be divided and not multiplied. For annual dividend= dividend per share will be multiplied by the frequency of payment.

Option C is not correct

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