# The valuation of securities and practical issues

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1. says

Sir, there is a term “Asset backing” in BPP book which is used in Valuation, can u please elaborate this term what does it mean?

• says

The term can mean several things, depending on the context. However, without seeing the relevant page in the BPP book and given that it is F9, it will simply be another term for the asset value (i.e. the value of the companies assets divided by the number of shares).
(Sorry for a delay in answering, but we cannot always see all the comments – it is better to ask questions in the relevant Ask the ACCA Tutor Forum – these questions are always answered very quickly)

2. says

Sir, I have a problem in Dividend cover, in BPP book it is mentioned that dividend cover is the number of times the actual dividend could be paid out of current profits but if we look at the formula it is Earnings per share /dividends per share..?? this does not explain the no. of times the dividend could be paid out of current profits, rather it should have been Dividends/ Earnings..??

• says

No – what BPP says is correct.

Suppose the earnings per share is 50c and the dividend per share is 10c.

Then you could pay the dividend 5 times out of the current earnings. The dividend cover would be 5.

3. says

Sir, you are really great teacher . Your lectures are valuable for me,
Tks you so much.

4. says

Hi John,

i’m not sure what i am doing wrong – how do you get a dividend cover of 2.06 with a P/E of 21.1 and a Dividend yeild of 2.3%?

• says

Divi per share (DPS) / Mkt value per share (MV) = 0.023
So……MV / DPS = 1 / 0.023 = 43.478

MV / EPS = 21.1, so MV = EPS x 21.1

So replacing MV in the equation in my second line gives: (EPS x 21.1) / DPS = 43.478
Dividing by 21.1 gives: EPS / DPS = 43.478 / 21.1 = 2.06 (= dividend cover)

Hope that helps

• says

Business Finance looked so simple when you taught it but working these questions in the kit is a killer! I had fun working the Working Capital questions the Investment appraisal and cost of capital.

5. says

Sir in which lecture or topic you have discussed about these topics
market capitalisation (equity market value?

price/earnings ratio method using the business sector average price/earnings ratio
i was doing past paper Q4 of december2012 where i saw those

• says

I cannot remember which lectures, but they are mentioned several times in different lectures, because the PE ratio in particular is so fundamental.

The market capitalisation is the total market value of the company’s shares (although I don’t know what you mean by discuss – there is nothing to discuss in that it is the market value of the company, by definition.)

The PE ratio is terribly important for the exam and again is covered completely in my lectures (and discussed )

• says

thank you Sir

6. says

Thank you John, you are really good teacher and entertaining in the same time as well.. “nobody’s face moves, its worrying me” 😀

7. says

Dear sir,
i found topic in my kaplan book called Efficient market hypothesis (EMH) can you tell me what is this?