NISM XV Corporate Actions — Practice Questions
Practice corporate actions questions for NISM Series XV — dividends, bonus, splits, rights issues, buybacks and their impact on price and ratios.
49 questions on Corporate Actions in the ScoreSetu bank — each with a detailed explanation and, where useful, a memory hook.
What this topic covers
- Dividends & buybacks
- Bonus issues & stock splits
- Rights issues
- Impact on valuation
Free sample questions
1. The Paid up capital of a company is Rs 5,00,000 with face value of Rs 10 per shares. The book value per share is Rs. 20 and the Dividend per share of the business is Rs 5. What is the Return on Capital Employed in the business?
- A. 25% ✅
- B. 20%
- C. 50%
- D. 33.33%
Answer: A — 25%
Why: Return on Capital Employed is similar to Return on Equity. Return on Equity = (Return Per Share / Book Value) x 100 = 5 / 20 x 100 = 25% DETAILED EXPLANATION : Here's how to calculate the Return on Capital Employed (ROCE) for this business: 1. Calculate the number of outstanding shares: Number of shares = Paid-up capital / Face value per share Number of shares = Rs. 500,000 / Rs. 10 Number of shares = 50,000 shares 2. Calculate the net income: In this case, we're given the dividend per share, but not the total profit. For simplicity, we'll assume that the dividend paid represents the net income for the business. This is a simplification, as companies often retain a portion of their earnings. Total dividend = Number of shares * Dividend per share Total dividend = 50,000 shares * Rs. 5 Total dividend = Rs. 250,000 Therefore, we'll assume the net income is Rs. 250,000. 3. Calculate the capital employed: Capital employed can be calculated in a few ways. Here, we'll use the total book value of the company, as it represents the total investment in the business. Total book value = Number of shares * Book value per share Total book value = 50,000 shares * Rs. 20 Total book value = Rs. 1,000,000 Therefore, the capital employed is Rs. 1,000,000. 4. Calculate the Return on Capital Employed (ROCE): ROCE = (Net income / Capital employed) * 100 ROCE = (Rs. 250,000 / Rs. 1,000,000) * 100 ROCE = 25% Therefore, the Return on Capital Employed for this business is 25%.
💡 P/B = Market Cap / Net worth (= Price / Book value per share).
2. As per Section 230 of Companies Act, which of the following is TRUE about 'Scheme of Arrangement'?
- A. Scheme of Arrangement is a court monitored settlement process between the company and its creditors ✅
- B. Scheme of Arrangement is the settlement of legal succession within the promoter family after the demise of the promoter
- C. Scheme of Arrangement is the process of merging the subsidiaries with the holding company
- D. Scheme of Arrangement is basically a agreement of co-operation by all the companies in an industry
Answer: A — Scheme of Arrangement is a court monitored settlement process between the company and its creditors
Why: Under section 230 of Companies Act 2013, Scheme of arrangement can be sought by the company or its creditors / members. The person claiming the scheme of arrangement shall approach the National Company Law Tribunal (NCLT). The tribunal then orders the meeting between the company, its creditors and/or members to arrive a compromise or arrangement.
💡 Scheme of Arrangement = court(NCLT)-monitored deal with creditors. Initiated by members, creditors OR company.
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