The Multiple Choice Questions Blog

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%

This work is licensed under a Creative Commons Attribution 4.0 International License.

A company makes annual profits of £10 million before interest payable of £2 million and ordinary dividends of £5 million.

It has in issue 20 million shares of £0.20 each, currently valued on the Stock Exchange at £5.00 each.

What is the company’s Price/Earnings (P/E) ratio? 

Select ONE answer:

1. 10
2. 12.5
3. 20
4. 33.3 

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 2

1. Not correct
2. Correct – £10M – £2M = £8M / 20M shares = £0.4 EPS ==> £5.00 / £0.40 = 12.5 P/E
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

A company’s published Profit and Loss Account gives the following information:

• operating profit  —  £4,000M
• interest expense  —  £200M
• taxation  —  £1,150M
• ordinary dividends  —  £1,200M

What is the profit figure to be used in the calculation of earnings per ordinary share?

Select ONE answer:

1. £1,150 million
2. £2,350 million
3. £2,650 million
4. £3,800 million 

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 3

1. Not correct
2. Not correct
3. Correct – £4,000M – £200M – £1,150M
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

The following data is available for XYZ plc.

• issued ordinary shares  — 1,000,000
• nominal value per share  —  £1.00
• market value per share  — £2.30
• net profit after taxation  —  £200,000
• retained earnings % of net profit after tax  —  50%

What is the net dividend yield?

Select ONE answer:

1. 4.35%
2. 8.70%
3. 10.0%
4. 20.0%

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 1

1. Correct – 50% of £200,000 = £100,000k or £0.10 per share / £2.30 = 4.35%
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

A company has an authorised share capital of 1.5 m ordinary shares at £1.00 each.

One million shares have been issued and have a market value of £4.50 per share. The directors are proposing a dividend of £0.10 per share for the year.

The year-end results are as follows:

• profits before tax  —  £180,000
• taxation  —  (£40,000)
• profits after tax  — £140,000 

What is the dividend cover?

Select ONE answer:

1. 0.9 times
2. 1.2 times
3. 1.4 times
4. 1.8 times 

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 3

1. Not correct
2. Not correct
3. Correct – 1,000,000 * £0.10 = £100k ==> £140k / £100k = 1.4
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.