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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Investing in Stocks

Ananya Traders Ltd. has a share price of Rs 400 and earnings per share (EPS) of Rs 25. Its dividend per share is Rs 10. What are its P/E ratio and dividend payout ratio respectively?

The P/E ratio is 400 divided by 25, which equals 16 times, and the dividend payout ratio is 10 divided by 25, which equals 40%. Payout uses EPS as the base, whereas dividend yield would use the share price.

  1. A16 times and 40%Correct
  2. B16 times and 2.5%
  3. C40 times and 16%
  4. D25 times and 40%

Explanation

P/E = price / EPS = 400/25 = 16 times. Payout ratio = DPS / EPS = 10/25 = 40%. The 2.5% option is the dividend yield (10/400), which is the wrong base. The other options invert or misuse the figures.

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