Question

Suppose a company earns a profit this year and has a dividend payout ratio of one half. What does this mean?

a. it will have no retained earnings
b. Its book value at the beginning of next year will be less than that of this year
c. It will not pay out all its earnings as dividends
d. All the above

Answer 1

C

Step-by-step explanation:

The dividend payout ratio is the ratio of dividends paid to shareholders in proportion to net income

Payout ratio = dividends / net income

If dividend payout ratio of one half, it means that only half of net income is paid as dividends