Earnings per Share and Dividend Analysis

1. Earnings per share will increase if the number of ordinary
shares issued decreases while net income remains the same.
Select one:
True
False
Question 2
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2. Match each of the following terms with the correct
description.
The percentage of profit per share paid out to
shareholders
Answer 1
Choose...Dividend payout ratio
Dividend yield Earnings per
shareDividend per share
The amount of money paid out to
shareholders for each share held
Answer 2
Choose...Dividend payout ratio
Dividend yield Earnings per share
Dividend per share
The portion of return on investment
attributable to dividends
Answer 3
Choose...Dividend payout ratio
Dividend yield Earnings per
shareDividend per share
The amount of money that could be allocated
to each share if the company paid out all its
earnings
Answer 4
Choose...Dividend payout
ratioDividend yield Earnings per
shareDividend per share
Question 3
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3. Gary’s Goods recorded a net profit of £250,000 in their

income statement for the current financial year. They have
5,000 ordinary shares in issue. They paid out £15,000 in
dividends to preference shareholders, and declared an
ordinary share dividend of £30,000 during the year. Ordinary
shares in Gary’s Goods are trading at a market price of £80
per share, while preference shares are trading at a price of
£40 per share.
What is the price earnings ratio for Gary’s Goods for the
financial year?
Select one:
a. 0.85
b. 1.82
c. 1.7
d. 1.6
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4. Which two of the following statements are true of a high
price earnings ratio?
Select more than one:
a. Investors are expecting high future growth in the value of
the shares.
b. It may be an indication that shares are overvalued.
c. Investors are not willing to pay more for a share than the
profit allocated per share.
d. It may be an indication that shares are undervalued.
Question 5
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5. Wanda’s Warehouse declared a dividend of £50 per share,
and their shares are trading at a price of £250 per share in