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

Case: Aarav Ltd has 10 crore shares outstanding, a market price of Rs 240 per share, net profit of Rs 300 crore, and its board declared a total dividend of Rs 90 crore. Net profit is after tax. What are its trailing P/E ratio and dividend payout ratio respectively?

P/E is 8 and the dividend payout ratio is 30%. EPS is Rs 30 (Rs 300 crore over 10 crore shares), so P/E is 240 divided by 30, which is 8. Payout is Rs 90 crore dividend over Rs 300 crore profit, which is 30%.

  1. A8 and 30%Correct
  2. B8 and 70%
  3. C80 and 30%
  4. D8 and 3.75%

Explanation

EPS = 300 crore/10 crore = Rs 30. P/E = 240/30 = 8. Payout = 90/300 = 30%. The 70% is the retention ratio, and 3.75% is the dividend yield (Rs 9/240), not the payout ratio.

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