If profits after tax are €4.8m and dividends paid are €2.4m, what is the dividend cover?

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Prepare for the Qualified Financial Adviser Exam 2 with flashcards and multiple choice questions, complete with hints and explanations. Get exam-ready and increase your confidence with our comprehensive study materials!

Multiple Choice

If profits after tax are €4.8m and dividends paid are €2.4m, what is the dividend cover?

Explanation:
Dividend cover shows how many times profits after tax can pay the dividend. It’s calculated as profits after tax divided by dividends paid. Here, 4.8 million divided by 2.4 million equals 2.0, so the dividend cover is 2 times. This means profits are sufficient to cover the dividend twice, indicating a comfortable cushion for maintaining the payout.

Dividend cover shows how many times profits after tax can pay the dividend. It’s calculated as profits after tax divided by dividends paid. Here, 4.8 million divided by 2.4 million equals 2.0, so the dividend cover is 2 times. This means profits are sufficient to cover the dividend twice, indicating a comfortable cushion for maintaining the payout.

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