The Payout Ratio Can Be Calculated by Dividing

question 76

Multiple Choice

The payout ratio can be calculated by dividing

• A) dividends per share by earnings per share.
• B) cash dividends by net income less preferred dividends.
• C) cash dividends by market price per share.
• D) dividends per share by earnings per share and dividing cash dividends by net income less preferred dividends.

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Definitions:

Simple Interest

Interest assessed only on the principal sum, or on the part of the principal that still needs to be repaid.

Principal Amount

The original sum of money borrowed in a loan or invested, distinct from interest or profit earned.

Invested

To be invested refers to the allocation of resources, such as capital or time, into a particular venture, asset, or effort with the expectation of generating a future return.

Present Value Equation

A mathematical formula used to determine the current value of a future amount of money or stream of cash flows given a specific rate of return.