Question

Bvi corporation had net income of $1,600,000 and paid dividends to common stockholders of $400,000 in 2014. the weighted average number of shares outstanding in 2014 was 500,000 shares. bvi corporation's common stock is selling for $50 per share on the nasdaq. bvi corporation's payout ratio for 2014 is

Answer 1

Calculation of Bvi corporation's payout ratio for 2014:

The formula to calculate the Payout ratio is as follows:

Payout Ratio = (Total Divided Paid / Net Income)*100

Bvi corporation's payout ratio for 2014 can be calculated as follows:

Payout Ratio = (Total Divided Paid / Net Income)*100

= (400000/1600000)*100

= 0.25*100

=25%

Hence, Bvi corporation's payout ratio for 2014 is 25%