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Working 5-Dividend Paid
May I know why have to “X 5/7” for before right issue?
Please explain how the 5/7 comes from.
How about “after” right issue too? Why there is no 2/7 for after right issue.
Thanks
Hi,
The equity share figure in the TB of $56,000 is the figure after the recording of the two for five rights issue. So when working out the total dividend of 2c per share that occurs after the rights issue we just multiply the number of shares in issue ($56,000 / $0.25 (par) = 224,000) by the dividend per share ($0.02).
When calculating the total dividend of 4c per share that took place before the rights issue took place then we don’t know the number of shares in issue. Given that there were 224,000 in issue after the rights issue then we need to work backwards to get the number in issue after.
Before the issue we had 5 shares and after the issue we had 7 (5 + 2 new), so we adjust by 5/7.
Thanks
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