Question

NOW Inc. released its annual results and financial statements. Grace is reading the summary in the business pages of today’s paper. In its annual report this year, NOW Inc. reported a net income of $136 million. Last year, the company reported a retained earnings balance of $425 million, whereas this year it increased to $500 million. How much was paid out in dividends this year?

Answer 1

The amount paid out in dividends this year by NOW Inc. is $61 million.

What are dividends?

Dividends are the periodic payments that companies issue to their stockholders as a way of compensating them for their investments in the companies.  They are paid out of profits.  Dividends can be in the form of stock or cash payments.

Data and Calculations:

Retained earnings, beginning balance = $425 million

Net income = $136 million

Retained earnings, ending balance = $500 million

Dividends paid out = $61 million ($425 + $136 - $500 million).

The retained earnings increased by $75 million ($500 - $425 million).

Thus, the dividends paid out by NOW Inc. this year is $61 million ($136 - $75 million).

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