Question

From the information below, compute the payout ratio for Kevin's Trailers.Net Income $200Cash Dividends (common) 40Retained Earnings 500Stock Dividends (common) 10a. 25%.b. 20%.c. 8%.d. 2%.

Answer 1

Answer: Option (b) is correct.

Explanation:

Given that,

Net Income = $200

Cash Dividends (common) = 40

Retained Earnings = 500

Stock Dividends (common) = 10

$payout\ ratio\ for\ Kevin's\ Trailers=\frac{Cash\ dividend}{Net\ Income}$

$payout\ ratio\ for\ Kevin's\ Trailers=\frac{40}{200}$

                                                               = 0.2

                                                               = 20%