Question

Schmaltz Herring revenue and costs are forecast to be changed this year from last. But the IRS has announced an increase in the corporate profits tax rate. If Schmaltz pays the same amount of dividends, its payout ratio will:

Answer 1

If Schmaltz pays the same amount of dividends, its payout ratio will:

change.

Step-by-step explanation:

Since the revenue and costs will change in the current year, with some increase in the corporate income tax rate by the IRS, the earnings per share will also change. If the amount of dividends paid out does not change, the payout ratio will still change as a result of the change in the earnings per share.

Schmaltz's payout ratio shows the relationship between the dividends paid to shareholders and the company's earnings. The simplest way to calculate the payout ratio is to divide the dividend per share by the earnings per share, then multiplied by 100.