Page 302 - FR Integrated Workbook 2018-19

Chapter 21

Example 4

Investor ratios

Extracts from the financial statements of Edam are presented below.

20X6
Statement of profit or loss $000

Profit for the year 3,500
———

Statement of financial position
Equity

Ordinary $1 share capital 10,000
———

Notes
Edam paid a dividend during the year of 10¢ per share, and at the year-end
the market price of Edam’s shares was $1.80.

There has been no change in Edam’s share capital during the year.

Required:

Calculate investor ratios for Edam for 20X6.

Solution
Earnings per share 3,500/10,000 35.0¢

Profit for year/No of shares

Price/Earnings ratio 180/35 5.1

Share price/EPS
Dividend yield 10/180 5.6%

Dividend per share/share price

Dividend cover (EPS/Div per share) 35/10 3.5

Or Profit for year/Total dividend Or 3,500/(10,000 × 10¢)

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