You have received a recommendation to invest in Togglit plc at a price of 150p per

share. Curious to know whether this proposed investment might be worthwhile, you
extract the following information from Togglit’s latest published accounts:
£
Issued ordinary shares of £1 each
Fully paid 60 000 000
Profit after tax 12 000 000
Ordinary share dividends 3 500 000

Required:
(a) Describe two Investor ratios
(b) Calculate the following ratios for Toggleit plc
(i) Earnings per share
(ii) Price/earnings (P/E)
(iii) Dividend per share
(iv) Dividend yield
(v) Dividend cover

Answers:
(a)
Earnings per share

Profit attributable to equity holders

Weighted average number of ordinary shares
outstanding during the period

EPS shows the earnings attributable to each ordinary share

P/E ratio

Current share price

EPS

P/E ratio provides a basis of comparison between companies. A higher P/E

ratio is generally associated with greater investor confidence about future
earnings.

Dividend cover

Earnings per share

Dividend per share

Dividend cover shows the number of times the dividend (paid net of tax) is
covered by net profits.
Dividend yield

Dividend per share

Current share price

Dividend yield provides a measure of the expected return on investment based

on the latest dividend and share price information.

(b)
(i) EPS 12,000,000 x 100 = 20p
60,000,000
(ii) P/E 150p = 7.5
20p
(iii) Dividend per share 3,500,000 x 100 = 5.83p
60,000,000
(iv) Dividend yield 5.83 x 100 = 3.886%
150.00
(v) Dividend cover 20.00 = 3.43 times
5.83