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

Company Veda Ltd reports: net profit Rs 90 crore, total shareholders' equity Rs 600 crore, 3 crore shares outstanding, market price Rs 450 per share, and dividend declared Rs 30 crore. What are its price-to-book (P/B) ratio and dividend payout ratio respectively?

P/B is 2.25 and the dividend payout ratio is 33.3%. Book value per share is Rs 600 crore divided by 3 crore shares, which is Rs 200, so Rs 450 divided by Rs 200 is 2.25. Payout is Rs 30 crore over Rs 90 crore profit.

  1. A2.25 and 33.3%Correct
  2. B1.5 and 33.3%
  3. C2.25 and 66.7%
  4. D1.5 and 30%

Explanation

Book value per share = 600/3 = Rs 200. P/B = 450/200 = 2.25. Dividend payout = dividend/net profit = 30/90 = 33.3%. Option 1.5 results from using EPS-style confusion (market cap 1,350 / 900 is not valid); 66.7% is the retention ratio, not payout.

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