A2 Business Studies Resources

1. Do Now – Ratio Analysis

2. Interpreting published accounts
(Part 3)

3. Learning Objectives
You should now be able to:
1. Understand how to select, calculate and interpret
financial ratios to assess performance.
2. Understand the meaning and significance of
specific financial strategies and how they interlink
in functional areas.

4. Shareholder Ratios
Shareholder ratios help
measure the value of the
return to a shareholder.
There are two main measures:
Dividend per share (DPS)
Dividend yield

5. SHAREHOLDER RATIOS
(Dividend per share – DPS)
This is a calculation of how many pence per share a shareholder can
expect to receive in dividends. Dividends can be paid on an interim basis
as well as at the end of a year, but it is the total dividend for the year that
is calculated.
Dividend per share = Total Dividends Dividend per share = £400m = 0.72
No of issued shares 550
This means that for every share owned, a shareholder will receive 72p.
A shareholder may be willing to accept a lower dividend per share payment in
the short-run if profits are to be reinvested for the long-term good of the
business. When making a judgement as to whether it is a good payment, you
would have to consider how much the share was purchased for and also
current market conditions.

6. SHAREHOLDER RATIOS
(Dividend yeild)
This is a measure of the dividend received as a rate of return compared to
the current market share price. It allows for a more meaningful
comparison of the value of investment in relation to other investments.
Dividend yield = Dividend per share x 100 Dividend yield = 0.72 = 6.37
Market share price 11.30
A yield of 6.37% means that if a dividend of £1 was received, the expected
value of the share would be £6.50.
A shareholder could compare this to other share dividend yields and also to
the rate of interest that could be achieved if the shares were sold and the
money invested in the bank.
Market share prices will be quoted via the Stock Exchange so are open to
going both up and down.

7. Your turn!
Calculate the Dividend
per share and Dividend
yield ratios for Alquimia
Plc.
What can you infer from Where does
the analysis? the
information
come from?

8. Practice makes perfect
Completed the ratio
analysis for Out and
About Plc.
What can you infer from
this information?

9. Re-cap Learning Objectives
You should now be able to:
1. Understand how to select, calculate and interpret
financial ratios to assess performance.
2. Understand the meaning and significance of
specific financial strategies and how they interlink
in functional areas.