Suppose a Firm Has a Retention Ratio of 35 Percent

question 91

Multiple Choice

Suppose a firm has a retention ratio of 35 percent and net income of $2 million. How much does it pay out in dividends?

• A) $700,000
• B) $1.3 million
• C) $2 million
• D) $3.07 million

Understand the interrelations between profitability, asset management, and leverage ratios.

Grasp the implications of changes in financial statement items on financial ratios and business performance.

Recognize the significance of liquidity ratios in assessing short term financial health.

Understand the impact of financing decisions on financial leverage and solvency.

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Definitions:

Foreign Exchange Market

The market where one country’s currency is traded for another’s.

Spot Exchange Rate

The exchange rate on a spot trade.

Forward Exchange Rate

The agreed-on exchange rate to be used in a forward trade.

Premium

The amount paid for a contract or policy over and above its nominal value or for a product above its market price due to special features or quality.