Day: February 17, 2021

A company has authorised capital of 500 000 £0.25 ordinary shares. It has issued 400 000 £0.25 ordinary shares, at a price of £0.60 a share. The market price of the shares is now £0.75 each.

The directors now wish to make a dividend payment which would give the shareholders a dividend yield of 5%. 

How much cash would the company need to distribute as dividend? 

Select ONE answer:

1. £5,000
2. £6,250
3. £12,000
4. £15,000

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct – (£15,000 / 400,000) / £0.75 = 5%

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