NISM Certifications · NISM-Series-XV: Research Analyst · Terminology in Equity and Debt Markets
A company reports net profit after tax of ₹60 crore, of which it pays dividends of ₹24 crore. It has 6 crore shares outstanding and no preference shares. What are its earnings per share (EPS) and dividend payout ratio respectively?
EPS is ₹10 (₹60 crore profit divided by 6 crore shares) and the dividend payout ratio is 40% (₹24 crore dividend divided by ₹60 crore profit). The 60% figure is the retention ratio, and ₹4 is only the dividend per share.
- A₹10 and 40%Correct
- B₹10 and 60%
- C₹4 and 40%
- D₹6 and 60%
Explanation
EPS = 60/6 = ₹10. Payout ratio = dividends/net profit = 24/60 = 40%. Retention would be 60%, so that option confuses payout with retention. ₹4 is dividend per share, not EPS.
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