Question : What is the significance of the dividend yield ratio?
Option 1: It measures the profitability of a company
Option 2: It indicates the liquidity position of a company
Option 3: It measures the return on investment in equity shares
Option 4: It determines the face value of equity shares
Correct Answer: It measures the return on investment in equity shares
Solution : The correct answer is (c) It measures the return on investment in equity shares.
The dividend yield ratio is a financial ratio that measures the return on investment in equity shares by comparing the annual dividend per share to the market price per share. It is calculated by dividing the annual dividend per share by the market price per share and multiplying by 100 to express it as a percentage.The significance of the dividend yield ratio lies in its ability to provide insights into the income generated from owning a particular stock relative to its market price.
It measures the return on investment in equity shares is the correct significance of the dividend yield ratio. By comparing the dividends received to the market price of the shares, it provides an indication of the return an investor can expect from their investment in equity shares.
