Suppose a firm pays total dividends of $125,000 out of net income of $500,000. What would the firm's retention ratio be?

Name: Suppose a firm pays total dividends of $125,000 out of net income of $500,000. What would the firm's retention ratio be?
Brand: Quizplus
Rating: 4.8 (56 reviews)

Question

Quizplus · Accepted Answer

The retention ratio is calculated as 1 minus the dividend payout ratio. The dividend payout ratio is $125,000 / $500,000 = 0.25 or 25%. Therefore, the retention ratio is 1 - 0.25 = 0.75 or 75%.

Suppose a Firm Pays Total Dividends of $125,000 Out of Net