CS Executive · Corporate Accounting and Financial Management · Dividend Decisions
Kaveri Industries Ltd has 5,00,000 equity shares of Rs 10 each and a net profit of Rs 15,00,000. It pays a cash dividend of Rs 1.50 per share. What is the dividend payout ratio?
The payout ratio is 50%. Total dividend is 5,00,000 shares times Rs 1.50, which is Rs 7,50,000, and dividing by net profit of Rs 15,00,000 gives one half. Equivalently, DPS of 1.50 over EPS of 3.
- A10%
- B15%
- C50%
- D25%Correct
Explanation
Total dividend = 5,00,000 x 1.50 = Rs 7,50,000. Payout ratio = 7,50,000 / 15,00,000 = 50%. Check: EPS = 3, DPS 1.5, so 1.5/3 = 50%. The option 15% mistakenly treats the DPS as a percentage of the face value (15%).
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