Calculate Retention Ratio Given the Following Information: EBIT $150,000; Interest

question 280

Multiple Choice

Calculate retention ratio given the following information: EBIT $150,000; interest expense $16,000; tax rate 30%; dividends paid $40,000.

• A) 35.55%
• B) 36.43%
• C) 57.36%
• D) 65.45%
• E) 68.23%

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Definitions:

Adjusting Entry

An accounting record made to update the book value of an asset or to correct or allocate income and expenses to the appropriate period.

Prepaid Asset

Expenses paid in advance for future benefits, such as insurance or rent, recognized as assets until they are utilized.

Prepaid Subscriptions

Payments made in advance for subscription-based services or products, recognized as assets until the services or products are received.

Calendar-Year

A one-year period that begins on January 1 and ends on December 31, used by businesses for accounting and tax purposes.