Question

Carlyle Corporation reported net income of $360,000 and paid dividends of $125,000 on its common stock and $50,000 on its preferred stock. Common stockholders’ equity was $1,600,000 at the start of the year and $2,000,000 at the end of the year. Total assets were $2,200,000 at the start of the year and $2,600,000 at the end of the year. What is the company’s payout ratio? Group of answer choices

Answer 1

0.347

Step-by-step explanation:

Data provided in the question:

Net income = $360,000

Dividends paid on common stock = $125,000

Dividends paid on preferred stock = $50,000

Common stockholders’ equity at the start of the year = $1,600,000

Common stockholders’ equity at the end of the year = $2,000,000

Now,

Payout ratio

= ( cash dividends declared to common stockholders ) ÷ ( Net income )

= $125,000 ÷ $360,000

= 0.347