Study the following Graph & table given below and answer the question that follows. Rate of Interest, Dividend Payout Ratio and the Retained Earnings of Five Companies Profit earned is either paid out as dividend or ploughed back in business as retained earning. Interest is paid on borrowings.
Question: 1
By how much do the borrowings of company B exceed that of company A?
Show Hint
To calculate borrowings from retained earnings, use the formula:
\[
\text{Retained Earnings} = \text{Interest} \times \left( 1 - \frac{\text{Dividend Payout Ratio}}{100} \right).
\]
- For Company A:
\[
\text{Borrowing of A} = \frac{234 \times 18}{100} = 130000
\]
- For Company B:
\[
\text{Borrowing of B} = \frac{576 \times 24}{100} = 240000
\]
- Difference:
\[
\text{Difference} = 240000 - 130000 = 110000
\]
Thus, the borrowings of Company B exceed those of Company A by Rs. 11,00,000.
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Question: 2
By how much does the dividend paid by company D exceed the dividend paid by company B?
Show Hint
To calculate the dividend paid by a company, use the formula:
\[
\text{Dividend Paid} = \text{Interest} \times \frac{\text{Dividend Payout Ratio}}{100}.
\]
- Dividend paid by Company D:
\[
\text{Dividend of D} = \frac{270 \times 32.50}{100} = 87.75 \, \text{lakh}
\]
- Dividend paid by Company B:
\[
\text{Dividend of B} = \frac{402 \times 19.60}{100} = 78.792 \, \text{lakh}
\]
- Difference in dividends:
\[
\text{Difference} = 87.75 - 78.792 = 32 \, \text{lakh}
\]
Thus, the dividend paid by company D exceeds that paid by company B by Rs. 32 lakh.
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Question: 3
What is the sum of profits made by companies A and B?
Show Hint
To calculate the total profit for a company, use the formula:
\[
\text{Profit} = \text{Retained Earnings} + \text{Dividend Paid}.
\]
- The total profit for each company can be calculated by adding the retained earnings and the dividend paid.
- For Company A:
\[
\text{Profit for A} = \text{Retained Earnings for A} + \text{Dividend Paid for A}
\]
\[
\text{Dividend Paid for A} = 234 \times \frac{22.50}{100} = 52.65 \text{ lakh}
\]
\[
\text{Profit for A} = 155 + 52.65 = 207.65 \text{ lakh}
\]
- For Company B:
\[
\text{Profit for B} = \text{Retained Earnings for B} + \text{Dividend Paid for B}
\]
\[
\text{Dividend Paid for B} = 576 \times \frac{19.60}{100} = 112.896 \text{ lakh}
\]
\[
\text{Profit for B} = 402 + 112.896 = 514.896 \text{ lakh}
\]
- The sum of profits for A and B:
\[
\text{Sum of Profits} = 207.65 + 514.896 = 722.546 \text{ lakh} \approx 700 \text{ lakh}
\]
Thus, the correct answer is (C).
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Question: 4
What is the sum of the borrowings of all five companies?
Show Hint
To calculate the borrowings of a company, use the formula:
\[
\text{Borrowings} = \frac{\text{Interest} \times 100}{\text{Rate of Interest}}.
\]
The borrowings of a company can be calculated as:
\[
\text{Borrowings} = \frac{\text{Interest} \times 100}{\text{Rate of Interest}}
\]
- For Company A:
\[
\text{Borrowings for A} = \frac{234 \times 100}{18} = 1300 \text{ lakh}
\]
- For Company B:
\[
\text{Borrowings for B} = \frac{576 \times 100}{24} = 2400 \text{ lakh}
\]
- For Company C:
\[
\text{Borrowings for C} = \frac{129.6 \times 100}{16} = 810 \text{ lakh}
\]
- For Company D:
\[
\text{Borrowings for D} = \frac{144 \times 100}{9} = 1600 \text{ lakh}
\]
- For Company E:
\[
\text{Borrowings for E} = \frac{180 \times 100}{15} = 1200 \text{ lakh}
\]
Now, the total borrowings for all companies is the sum:
\[
\text{Total Borrowings} = 1300 + 2400 + 810 + 1600 + 1200 = 7460 \text{ lakh}
\]
Thus, the total sum of the borrowings of all five companies is Rs. 7460 lakh.
Thus, the correct answer is (D).
