Suppose a Firm Has a Dividend Payout Ratio of 65

question 43

Multiple Choice

Suppose a firm has a dividend payout ratio of 65 percent and net income of $5 million. What would be the annual addition to retained earnings?

• A) $3,250,000
• B) $5,250,000
• C) $1,750,000
• D) $750,000

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Definitions:

Karl Marx

A 19th-century philosopher, economist, and political theorist known for his critical theories about capitalism and his influence on the development of socialist and communist movements.

Capitalist

A person who supports or engages in the principles of capitalism, a system where trade, industries, and the means of production are largely or entirely privately owned and operated for profit.

Invisible Hand

A metaphor introduced by Adam Smith to describe the self-regulating nature of the market economy driven by individuals' pursuit of their own interests.

Price Mechanism

The system by which the prices of goods and services are determined in a free market, based on the principles of supply and demand.