Q51145 Hindustan Manufacturers have to make a preference dividend of 60,000. The earnings after taxation is 3,00,000. What will be the Dividend coverage ratio? What does it mean?

Based on IMT CDL Assignment Solution and others

Solution:

= Dividend Coverage Ratio

= Earnings After Taxation/ Preference Dividend

= 3,00,000/ 60,000

= 5:1

Since the value of the dividend coverage ratio is quite high, the company has a strong cushion for the payment of preference dividend.

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