Suppose a firm has a dividend payout ratio of 47 percent and net income of $7 million. What would be the annual addition to retained earnings?

Question

Quizplus · Accepted Answer

The annual addition to retained earnings is calculated as the portion of net income that is not paid out as dividends. With a dividend payout ratio of 47%, the firm retains 53% of its net income. Therefore, the retained earnings would be 53% of $7 million, which is $3,710,000.

Suppose a Firm Has a Dividend Payout Ratio of 47