Herman Corporation had net income of $100,000 and paid dividends of $25,000 to common stockholders and $20,000 to preferred stockholders in 2017. Herman Corporation's common stockholders' equity at the beginning and end of 2017 was $450,000 and $550,000, respectively. Herman Corporation's payout ratio for 2017 is
A)45%.
B)25%.
C)20%.
D)5%.

Question

Quizplus · Accepted Answer

The payout ratio is calculated as dividends paid to common stockholders divided by net income. Here, it is $25,000 / $100,000 = 25%.

Herman Corporation Had Net Income of $100,000 and Paid Dividends