A Firm Had Net Income of $1,000,000 During the Year

question 11

Multiple Choice

A firm had net income of $1,000,000 during the year.and there are 300,000 shares outstanding, what is the firm's payout ratio?

• A) 25%
• B) 100%
• C) 50%
• D) 75%

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Definitions:

Cash Basis

A financial recording strategy that logs earnings and expenditures upon the actual receipt or payment of money, as opposed to when they are earned or incurred.

Direct Method

A way of preparing a cash flow statement where cash receipts and payments are reported directly.

Operating Activities

Transactions and other events related to the core business operations, affecting the operational cash flows of a company.

Selling and Administrative Expense

A category of expenses including overheads related to the general operation of a company, such as executive salaries, marketing, office supplies, and utilities.