NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Investing in Stocks
A company reports net profit after tax of Rs 60 crore, has 10 crore shares outstanding, and its share trades at Rs 120. It pays total dividends of Rs 24 crore. What is its dividend payout ratio and P/E ratio respectively?
The dividend payout ratio is 40% and the P/E ratio is 20. EPS is Rs 6 (Rs 60 crore over 10 crore shares), so P/E is 120 divided by 6, which is 20. Payout is Rs 24 crore divided by Rs 60 crore, which is 40%.
- A40% and 20Correct
- B60% and 20
- C40% and 12
- D25% and 20
Explanation
EPS = 60/10 = Rs 6. P/E = 120/6 = 20. Payout ratio = dividends/net profit = 24/60 = 40%. The 60% option is the retention ratio. The 12 option divides price by dividend per share incorrectly mixed with another figure.
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