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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investing in Stocks (NISM XXI-A)

A stock has earnings per share (EPS) of Rs 40 and a market price of Rs 600. If the company pays a dividend of Rs 12 per share, what are the price-earnings ratio and the dividend payout ratio respectively?

The P/E is 15 times (Rs 600 divided by Rs 40 EPS) and the dividend payout ratio is 30% (Rs 12 dividend divided by Rs 40 EPS). Payout is measured against earnings, not against market price.

  1. A15 times and 30%Correct
  2. B15 times and 3.33%
  3. C50 times and 30%
  4. D20 times and 2%

Explanation

P/E = 600/40 = 15 times. Dividend payout = dividend/EPS = 12/40 = 30%. The 3.33% figure wrongly uses a different base, and 50 times is dividend divided into price.

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