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Standard XII

Business Studies

Dividend Decision

Declaration o...

Question

Declaration of dividend on equity share cause the EPS to .

increase

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decrease

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remain unchanged

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none of these

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Solution

The correct option is B remain unchanged
EPS (Earning Per Share) = Net profit available to equity shareholders / Number of equity share outstanding
If the dividend is declared, still the Net profit available to equity shareholders would remain the same. It is just that the net profit would segregated into two parts. A certain amount would be distributed as dividend and the remaining part would be retained as reserves and surplus. But, then too the retained amount would be the amount available to the equity shareholders.

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Payment of fixed rate of dividend to preference shares may enable a company to declare higher rates of dividend for the equity shareholders in good times.

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Q. Who formulated the following model for estimating the market price of equity share?

P = \frac{D + \frac{R_{a}}{R_{c}} (E - D)}{R_{c}}

Where,

P =

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(b) Refund of capital

(d) Voting Rights

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