14.2 Investment valuation ratios Flashcards
1
Q
What ratios provide useful data for ordinary shareholders?
A
Dividends - payout ratio - cover ratio - yield ratio Earnings - earnings per share (EPS) - price/earnings (P/E)
2
Q
What is the dividend payout ratio?
A
A measure of earnings paid as dividends as a percentage of profits (after tax and preference dividends).
DPR = [annual dividend/ profits (after tax and pref. dividend)] x 100
3
Q
What is the dividend yield ratio?
A
Indication of dividends paid as a percentage of share price.
Dividend yield = [dividend per share] / [market price per share] x 100
4
Q
What is the dividend cover ratio?
A
The invest of dividend payout ratio - i.e. profits after tax divided by dividends paid.
Dividend cover = [profits after tax and preference dividends] / dividends for the year
