Which of the Following Is Correct for a Firm with $400,000

question 20

Multiple Choice

Which of the following is correct for a firm with $400,000 in net earnings, 20,000 shares, and a 30% payout ratio?

• A)retained earnings will increase by $120,000
• B)each share will receive a $1.20 dividend
• C)$120,000 will be spent on new investment
• D)the dividend per share will equal $6.00

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Definitions:

Social Security Tax

A mandatory contribution to the U.S. Social Security system, levied on both employers and employees, to fund retirement, disability, and survivorship benefits.

Medicare Tax

A federal tax paid by employees and employers to fund the Medicare program, which provides health insurance for individuals who are 65 years of age and over, or who meet other specific criteria.

Payroll Taxes

Taxes imposed on employers and employees based on the wages and salaries of employees, used to finance social security and Medicare programs.

State Unemployment Contributions

Taxes paid by employers to state government funds for unemployment compensation programs.