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  2. Dear sir,

    What does ‘the volume of business in the share” means as quoted below from the notes of Chap # 16. Any example?

    “In practice, market values do not change instantly on changes in expectations – but the speed depends on the volume of business in the share.”

    Thanks,

  3. Hi John,
    We are taking PE ratio of similar quoted companies, because we are considering to take over an unquoted company. What if the company under consideration is itself a quoted company, can we then, take the PE ratio of the company itself?

      • Certainly not! (and neither are acquisitions of unquoted companies always done based on PE ratios).

        If you are acquiring another company you will look at all different methods to get a basis for deciding how much to offer. If they are quoted then you obviously will not bother offering less than market value because the current shareholders will not be prepared to sell at less than market value.

  4. Sir If we have to calculate the Market Value and the dividend in ABOUT TO PAID it means that we have to find Market Value Cum-Div And if the dividend in just paid then the Market Value that we calculate should be Ex-Div? And in finding the Required Rate Of Return we Always Subtract Current Dividend from the Market Value Cum-Div(Because we always deal with Ex-Div in Required Return)?

    • 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)

      • #smartabrar asset backing means… how much the company has asset .. its showing the strength of company asset

  7. 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..??

    • 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 馃檪

  11. 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

    • 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 馃檪 )

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