2.2.4 Share valuation
This short quiz is a chance to quickly check what you know about share valuation.
Activity 2.3 What do you know about share valuation?
a.
2 pence
b.
450 pence
c.
45 pence
d.
0.5 pence
The correct answer is b.
Discussion
The ‘fair’ share price is 30 pence × 15.
a.
pre-tax profits divided by the total cost of dividends
b.
share price divided by earnings per share
c.
earnings per share divided by net dividend per share
d.
dividend income per share as a percentage of the share price.
The correct answer is c.
Discussion
The ratio shows how well placed a company is financially to pay its shareholders a dividend.