Question

Dividends per share:

Multiple Choice

• Increases as the net income increases as long as the number of shares outstanding remains constant.

• Decreases as the number of shares outstanding decrease, all else constant.

• Are inversely related to the earnings per share.

• Are based upon the dividend requirements established by Generally Accepted Accounting Procedures.

• Are equal to the amount of net income distributed to shareholders divided by the number of shares outstanding.

Answer 1

Dividend per share (DPS) is the total dividend distributed to shareholders/no of shares outstanding.

A is False Net income / No of shares outstanding is earnings per shares. Though earnings plays a major role in dividend, doesnt mean if earnings is higher, even dividend will be high. It depends on Dividend policy of each company

2. False. If no of shares reduce, the DPS would increase. Same amount of dividend distributed to less no of shareholders.

3. False. Its directly related. If earnings are more, companies can distribute more dividend as per dividend rate. Loss making companies generally doesnt declare dividend.

4. False GAAP rules are on accounting and reporting, not on distribution of dividends.

5. true. Dividend per share (DPS) is the total dividend distributed to shareholders/no of shares outstanding.