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NISM Certifications · NISM-Series-XV: Research Analyst · Terminology in Equity and Debt Markets

A stock has a market price of Rs 240, and the company's latest annual EPS is Rs 12 while dividend per share is Rs 3. What are the P/E ratio and dividend payout ratio respectively?

The P/E ratio is 20 times and the dividend payout ratio is 25%. P/E is price Rs 240 divided by EPS Rs 12, and payout is dividend Rs 3 divided by EPS Rs 12.

  1. A20 times and 25%Correct
  2. B20 times and 4%
  3. C25 times and 25%
  4. D16 times and 20%

Explanation

P/E = 240 / 12 = 20 times. Payout ratio = DPS / EPS = 3 / 12 = 25%. The 4% option is mixing up payout with something else, and 25 times inverts or misuses the figures.

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