Comprehension

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
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: \[ \text{Retained Earnings} = \text{Interest} \times \left( 1 - \frac{\text{Dividend Payout Ratio}}{100} \right). \]
Updated On: Mar 7, 2025
  • Rs.13,20,000
  • Rs.12,10,000
  • Rs.10,00,000
  • Rs.11,00,000
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The Correct Option is D

Solution and Explanation

- 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?

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To calculate the dividend paid by a company, use the formula: \[ \text{Dividend Paid} = \text{Interest} \times \frac{\text{Dividend Payout Ratio}}{100}. \]
Updated On: Mar 7, 2025
  • Rs.32 lakh
  • Rs.23 lakh
  • Rs.320 lakh
  • Rs.230 lakh
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The Correct Option is A

Solution and Explanation

- 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?

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To calculate the total profit for a company, use the formula: \[ \text{Profit} = \text{Retained Earnings} + \text{Dividend Paid}. \]
Updated On: Mar 7, 2025
  • Rs.600 lakh
  • Rs.500 lakh
  • Rs.700 lakh
  • Rs.800 lakh
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The Correct Option is C

Solution and Explanation

- 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?

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To calculate the borrowings of a company, use the formula: \[ \text{Borrowings} = \frac{\text{Interest} \times 100}{\text{Rate of Interest}}. \]
Updated On: Mar 7, 2025
  • Rs.14.6 lakh
  • Rs.146 lakh
  • Rs.14.6 crore
  • None of these
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The Correct Option is D

Solution and Explanation

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).
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