Dividend Yield This is dividend per share over market price. The dividend should be based on the gross distribution, i.e. including the associated tax credit. This latter will be a function of the basic personal tax rate in force at the time of the actual payment. CIMA's net dividend is 10p (£25K dividend/250K shares in issue), which translates into a gross equivalent of 13.33p at a 25 per cent basic rate of tax. At the market price of 310p, therefore, the yield is Again, any change in the market price will give a revised yield. Dividend cover This ratio measures the number of times that the most recent dividend could have been paid out of the available profits; it is a 'safety measure', i.e. the higher the cover, the safer the dividend for future years (or the potential for an increase in its size). Assuming that the company is in a normal tax position, the calculation uses the net dividend per share, thus: Complications can arise, however, when foreign tax on overseas earnings becomes significant, and the reader is referred to Holmes and Sugden (1986) for a full worked example of this situation. Univariate and multivariate analysis Financial accounting texts (including the present one) have tended to adopt a univariate approach to ratio analysis, i.e. only one ratio at a time is examined, and after a sufficient number of individual ratios have been calculated and analysed, a picture of the operating performance and financial position of the company is formed. This is the predominant approach in practice. However, the last 20 years have seen the development of a multivariate approach, in which statistical techniques such as multiple regression analysis and discriminant analysis are used on several ratios simultaneously. As Blake (1989) has pointed out, most research in this field has concentrated on the prediction of liquidity problems. By weighting a number of ratios, a so-called 'Z' score is produced, and from an analysis of firms in the particular industry under consideration which have become bankrupt, a score is set below which bankruptcy is predicted.