Shareholders’ Interest and Risk

Philip Dunn sets you a series of questions relating to measures of shareholders’ interest and risk.

The summarised Financial Statements of Davenport-Dunn Art Supplies Plc for years ended X1 and X2 are shown below.

Statement of Profit or Loss

The following Ordinary Dividend had been paid in each year. X1 £4.76m X2 £5.99m

Statement of Financial Position

The nominal value of the issued share capital comprised Ordinary Shares of £0.25 each. Current Market Price per Share: X1 £1.50 X2 £1.75.

Please answer the following MCQ tasks below:


1: Calculate Gearing/ Leverage (Debt:Debt+Equity)

(a) 46.80%(a) 37.33%
(b) None of these(b) 27.19%
(c) 31.89%(c) 81.82%
(d) 87.26%(d) None of these

Shareholders’ Interest:

2: Calculate the Return on Equity/Shareholders

(a) 36.70%(a) 37.00%
(b) 9.34%(b) 26.90%
(c) 25.00%(c) 25.90%
(d) 25.69%(d) 10.37%

3: Calculate Earnings per Share

(a) 39.19 pence(a) 49.55 pence
(b) 78.38 pence(b) 34.68 pence
(c) 27.44 pence(c) 99.10 pence
(d) 54.87 pence(d) 69.37 pence

4: Calculate the Price Earnings Ratio.

(a) 3.83(a) 3.53
(b) 1.91(b) 5.05
(c) 5.47(c) 1.76
(d) 2.73(d) 2.52

5: Calculate the Dividend per Share

(a) 5.00 pence(a) 7.56 pence
(b) 6.01 pence(b) 15.12 pence
(c) 12.02 pence(c) 5.00 pence
(d) 10.00 pence(d) 10.00 pence

6: Calculate the Dividend Yield

(a) 3.33%(a) 4.32%
(b) 4.01%(b) 8.64%
(c) 8.01%(c) 2.86%
(d) 6.67%(d) 5.71%

7: Calculate the Dividend Cover

(a) 6.52(a) 6.55
(b) 7.35(b) 4.59
(c) 3.63(c) 7.21
(d) 4.57(d) 5.77


1: X1 c, X2 b

2: X1 d, X2 c

3: X1 c, X2 b

4: X1 c, X2 b

5: X1 b, X2 a

6: X1 b, X2 a

7: X1 d, X2 b

• Dr Philip E Dunn is a freelance author and technical editor for Kaplan and Osborne Books.