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ACCA F9 Capital Structure and Financial Ratios – Other financial ratios
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Hi Sir,
1. For Dividend per share, why not include the Dividend 2800 for the Preference shares as it seems there’s enough profit (11200) to pay for it?
2. I still don’t understand why Higher PE Ratio relevant to shareholders are expecting higher Future Growth. Would you explain more, please?
1. Dividend per share refers to ordinary shares. Preference shares are paid a fixed dividend.
2. The price people are prepared to pay for a share depends on what they expect from the company in the future. The more they expect the company to grow, the more they will pay for the share. The higher the share price, the higher will be the PE ratio.
I don’t know what you mean by O.S. !!
The profit belongs to the shareholders, but the dividend is the amount actually paid to them – the rest is retained in order to expand the company and earn more profits in future years.
OK :-). Well, my answer before still applies.
Hi
I’m wondering why you included ordinary share dividends in the income statement. I thought that only preference share dividends are included as they are an expense to the business whereas dividends paid on ordinary shares are not ?
Dividends do not appear on the Income Statement proper. Here they have just been shown at the bottom to that the retained profit can appear.
Paper F9 is not a financial accounts exam and so the layout of the statements is not as important. It is the ratios and interpretation of them that matter.
Dear Sir,
Could you please explain why the reference dividend doesn’t change in next year (till 225) while we assume that the dividend growth rate of 4% in unchange and ordinary dividend expected to increase by 4% per year? what does it means? I thing both reference and ordinary dividend will increase by 4%.
Tks Sir
Preference shares always have a fixed dividend.
(Some investors prefer this because although the dividend will not increase if the company does well, they are guaranteed the fixed dividend each year (provided the company does not go bankrupt) because they get their dividend first. Ordinary shareholders can only get a dividend if there is anything left after paying the preference dividends.)