Which Financial Ratio Indicates the Dividend Rate of Return to Common

question 89

Multiple Choice

Which financial ratio indicates the dividend rate of return to common shareholders at the current market price?

• A) return on equity
• B) dividend yield on common stock
• C) price/earnings ratio
• D) dividend payout ratio
• E) earnings per share

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Definitions:

Present Value Factor

Present value factor is a multiplier used in calculating the present value of a future sum of money or stream of cash flows, given a specified rate of return.

Market Rate

The prevailing interest rate available in the marketplace for instruments of similar risk and maturity.

Down Payment

An initial payment made when something is bought on credit.

Successful-efforts Method

An accounting method used in the oil and gas industry where costs are capitalized only if successful discoveries are made.