QFA Investments (Poorly Performing Areas) Exam Questions And Answers

Key numerical Measures in Assessing Share Value - ANS Gross Dividend Yield Dividend Cover Earnings Per Share The P/E Ratio Net Asset Value Market Capitalisation EBITDA Dividends Company - ANS Dividends from Irish resident companies are assessed to income tax under Schedule F, at the investor's marginal tax rate. Dividends paid by Irish resident companies are normally subject to dividend withholding tax (DWT) at standard rate of tax, that is, currently 25%. The investor is taxed on the sum of the (net dividend received + DWT deducted), with the DWT then being allowed as a credit or deduction from the investor's total income tax liability Dividend - Investor - ANS Where an investor opts to receive dividends in the form of shares from an Irish resident company (scrip dividend), instead of cash, DWT is applied to the gross cash amount and the net amount is then used to buy shares for the investor at the predetermined price. However, the investor is still liable to income tax at their marginal rate on the gross dividend, with allowance for the DWT deducted at source, as if he or she had received the cash dividend payment. A similar system operates in respect of dividends received on many foreign shares. Currently, however, there is no with-holding tax on UK dividends. Revenue plan to move to an individualised DWT rate at some stage, which will be based on each investor's own tax rate. This will see higher rate taxpayers having a DWT of currently 40% with standard rate taxpayers having a 20% rate applied. No date has yet been confirmed for the change. Gross Dividend Yield - ANS Gross annual dividend, divided by current share price Dividend Cover - ANS A ratio that measures the potential for future capital growth of the firm. It measures how easily the dividend can be paid (or 'covered') out of the current profits of the firm. It is calculated by dividing the profit accruing to shareholders by the level of dividends. Earnings Per Share - ANS Net income of a company divided by the number of shares The P/E Ratio - ANS Price per share divided by earnings per share Net Asset Value - ANS Value of a company's net assets divided by the number of shares Market Capitalisation - ANS Number of issued shares x current share price. Represents the total value of a company. EBITDA - ANS Earnings before interest, taxes, depreciation, and amortization The following can reclaim from Revenue, DIRT already deducted from deposit interest if the depositor is not otherwise liable to income tax on the interest - ANS A: Companies. If the company is not taxable on its profits and income, for example, has substantial trading losses which it can offset against its income, it can reclaim any DIRT suffered on deposit interest earned, where it had not completed a declaration to obtain a DIRT-free return. B: Individuals (or their spouse/civil partner) who are over age 65 and whose total income was less than the relevant income exemption limit in the year. C: Individuals who are permanently and totally incapacitated as a result of personal injury can reclaim DIRT arising from the investment of compensation awards, where the investment returns are the sole or main income (that is, more than 50%) of the individual. This also extends to the investment of compensation awards from the Hepatitis C Tribunal. D: Individuals who received compensation awards for thalidomide children can reclaim DIRT arising from the investment of such awards.