Quasar Corporation had net income of $210,000 and paid dividends to common stockholders of $63,000 in 2020. The weighted average number of shares outstanding in 2020 was 50,000 shares. Quasar Corporation's common stock is selling for $30 per share on the New York Stock Exchange. Quasar Corporation's payout ratio for 2020 is

Question

Quizplus · Accepted Answer

Payout ratio measures the percentage of earnings that is paid out in dividends to common stockholders. It is calculated as follows:

Payout ratio = Dividends / Net income

In 2020, Quasar Corporation had net income of $210,000 and paid dividends of $63,000. Therefore, its payout ratio is:

Payout ratio = 63,000 / 210,000 = 0.30 or 30%

Therefore, the best choice is B.

Quasar Corporation Had Net Income of $210,000 and Paid Dividends