Final answer:
The payout ratio for Moon and Sons Inc is calculated by subtracting the retained earnings from the total earnings to find the dividends paid and then dividing this by the total earnings. For Moon and Sons Inc, the payout ratio is 49.02%.
Step-by-step explanation:
The payout ratio is the proportion of earnings paid out to shareholders in dividends. To calculate this, we need to know two figures: the total earnings and the dividends paid. If a company retains some of its earnings, the remainder after retention is assumed to be the dividend paid out. For Moon and Sons Inc, the earnings last year were $255 million, and they retained $130 million. Therefore, the dividends paid out would be the difference between the total earnings and the retained earnings, which is $255 million - $130 million = $125 million.
To get the payout ratio, we divide the dividends paid by the total earnings: $125 million / $255 million = 0.4902 or 49.02%. Therefore, the payout ratio for Moon and Sons Inc is 49.02%.