The following information is available for companies A,B,C and D:
$$\begin{array} { l c r r r }
& \text { A } & { \text { B } } & \text { C } & { \text { D } } \
\text { Number of ordinary shares } & 1,000,000 & 1,250,000 & 750,000 & 500,000 \
\text { Current share price } & £ 2.50 & £ 3.00 & £ 1.50 & £ 1.75 \
\text { Total profits after tax } & £ 200,000 & £ 225,000 & £ 150,000 & £ 250,000 \
\text { Total ordinary dividends } & 100,000 & 100,000 & 50,000 & 40,000
\end{array}$$

Which company has the highest dividend cover?
A) A
B) B
C) C
D) D

Question

The following information is available for companies A,B,C and D:
$$\begin{array} { l c r r r } 
& \text { A } & { \text { B } } & \text { C } & { \text { D } } \
\text { Number of ordinary shares } & 1,000,000 & 1,250,000 & 750,000 & 500,000 \
\text { Current share price } & £ 2.50 & £ 3.00 & £ 1.50 & £ 1.75 \
\text { Total profits after tax } & £ 200,000 & £ 225,000 & £ 150,000 & £ 250,000 \
\text { Total ordinary dividends } & 100,000 & 100,000 & 50,000 & 40,000
\end{array}$$

Which company has the highest dividend cover?
A) A
B) B
C) C
D) D

Quizplus · Accepted Answer

Dividend cover is calculated as Total Profits After Tax / Total Ordinary Dividends. For each company: A = 2 (£200,000 / £100,000), B = 2.25 (£225,000 / £100,000), C = 3 (£150,000 / £50,000), D = 6.25 (£250,000 / £40,000). Company D has the highest dividend cover of 6.25.

The Following Information Is Available for Companies A,B,C and D