QUESTION :RATIO ANALYSISThe capital of E Co Inc is as follows9% Preference shares of $10 each...

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QUESTION :RATIO ANALYSISThe capital of E Co Inc is as follows9% Preference shares of $10 each $300,000Equity shares of $10 each $800,000The accountant has ascertained the following information .Profit (after tax at 60%) $270,000 Depriciation $60,000,Equity dividend paid 20%,Market price of equity shares $40You are required to state the following ,showing the necessary workings.A) Dividend yield on the equity sharesB) Cover for the preference and equity dividendsC) Earnings for equity sharesD) Price-earning ratio.
	
Document Preview: QUESTION :RATIO ANALYSISThe capital of E Co Inc is as follows9% Preference shares of $10 each			$300,000Equity shares of $10 each				$800,000The accountant has ascertained the following information .Profit (after tax at 60%) $270,000 Depriciation $60,000,Equity dividend paid 20%,Market price of equity shares $40You are required to state the following ,showing the necessary workings.Dividend yield on the equity sharesCover for the preference and equity dividendsEarnings for equity sharesPrice-earning ratio.

Robert · Accepted Answer

SOLUTION :
A)Dividend yield on equity shares :
= Dividend per share/Market price per share x 100
= $2 (20% of $10)/$40 x 100
= 5%
B) Dividend coverage ratio:
i)Preference = Profit after taxes/Dividend payable to Preference sharesholders
             = $270,000/$27,000(9% of 300,

QUESTION :RATIO ANALYSIS The capital of E Co Inc is as follows 9% Preference shares of $10 each $300,000 Equity shares of $10 each $800,000 The accountant has ascertained the following information...

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