Ratios From Shareholders’ Point Of View

1.         Preference dividend cover: this ratio expresses net profit after tax as so many times of preference dividend payable. This is calculated as:

Net Profit After Tax

-------------------------

Preference Dividend

2.         Equity Dividend Cover: this ratio gives information about net profit available to equity shareholders. This ratio expresses profit as number of times of equity dividend payable. This ratio is calculated using the following formula:

Net Profit After Tax – Preference Dividend

-------------------------------------------------

Equity Dividend

3.   Dividend Yield On Equity Shares Or Yield Ratio: this ratio interprets dividend as a percentage of market price per share. It is calculated as:

Dividend Per Share

--------------------------- X 100

Market Price Per Share

4.   Price Earning Ratio: this ratio tells how many times of earnings per share is the market price of the share of a company. The formula to calculate this ratio is:

Market Price Per Share

---------------------------

Earnings Per Share

Illustrations