What Is the Plowback Ratio for a Firm That Has

question 9

Multiple Choice

What is the plowback ratio for a firm that has earnings per share of $12.00 and pays out $4.00 per share as dividends?

• A)25.00 percent
• B)33.33 percent
• C)66.67 percent
• D)75.00 percent

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Definitions:

Profit Margin

A financial metric that measures the percentage of revenue that exceeds the cost of goods sold, indicating the efficiency of a company in managing its costs and profit generation.

Retained Earnings

Retained earnings are the portion of a company's profits that are kept or retained within the company rather than paid out to shareholders as dividends, often used for reinvestment in the business or to pay down debt.

Marginal Tax Rate

The rate of tax applied to your next dollar of income, used in progressive tax systems where tax rates increase as income rises.

Percentage Of Sales Approach

Financial planning method in which accounts are projected depending on a firm’s predicted sales level.