Tag: Dividend Cover

Accounting Multiple Choice Question – 30 October 2023

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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The issued share capital of Alex Trading plc is as follows:

  • 400,000 4 % preference shares of £1.00 each fully paid
  • 1,600,000 ordinary shares of £0.50 each fully paid
  • The company’s profit for the year after interest and tax is £128,000

An appropriate dividend cover for the ordinary share is 2.0 times.

What will be the dividend per ordinary share?

Select ONE answer:

  1. £0.035
  2. £0.040
  3. £0.070
  4. £0.080

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 = £128,000 – (£0.4M * 0.04) = £112k / 2 = £56k / 1,600 k shares = £0.035
  2. Not correct
  3. Not correct
  4. Not correct

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