Stocks and Shares Practice Test 1

Question : 12 of 40

Marks: +1, -0

The capital of a Pharma company consists of Rs 15 lakh in 6% cumulative preference shares of Rs 100 each and Rs 30 lakh in equity shares of Rs 10 each. The dividend on cumulative preference shares for earlier year was not paid. This year, the company has to distribute a profit of Rs 3 lakh after keeping 20% as the reserve fund. Find the percentage rate of dividend paid to the equity shareholders.

1.5%
2%
3.2%
4%
2.8%

Validate

Solution:

Reserve fund

=20/100× 3,00,000

= Rs 60,000
Profit to be distributed = 3,00,000 - 60,000 = 2,40,000
Annual dividend for 6% cumulative preference shareholders

= 6/100× 15,00,000 = 90,000

This needs to be paid for 2 years (last year and current year) as the preference shares are cumulative and the last year’s dividend was not paid.
∴ Total Dividend paid to preference shareholders = 2 × 90,000 = 1,80,000/-
Now, dividend to be paid to preference share holders = 2,40,000-1,80,000 = Rs 60,000
∴ Rate of dividend

=60000/3000000×100=2

∴ The rate of dividend to the equity shareholders is 2%.

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