NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Investing in Stocks
A company reported earnings per share (EPS) of Rs 25 and declared a dividend of Rs 10 per share. Its share trades at Rs 500. What are the dividend payout ratio and the P/E ratio respectively?
The dividend payout ratio is 40% and the P/E ratio is 20. Payout is dividend per share Rs 10 divided by EPS Rs 25, and P/E is market price Rs 500 divided by EPS Rs 25. The retained portion is the remaining 60%.
- A40% and 20Correct
- B25% and 50
- C40% and 50
- D60% and 20
Explanation
Dividend payout = 10/25 = 40%. P/E = 500/25 = 20. Using the dividend instead of EPS in the denominator gives 50, which is wrong. The retention ratio is 60%, which is not the payout ratio.
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