Calculate payout ratio given the following information: cash dividends paid = $6,000; sales = $100,000; cost of goods sold = $45,000; selling and administrative expenses = $25,000; interest
Expense = $6,000; tax rate = 30%.

Question

Quizplus · Accepted Answer

The payout ratio is calculated as dividends paid divided by net income. First, calculate net income: Sales - COGS - Selling/Admin Expenses - Interest Expense = $100,000 - $45,000 - $25,000 - $6,000 = $24,000. Then, apply the tax rate: $24,000 * (1 - 0.30) = $16,800. Finally, calculate the payout ratio: $6,000 / $16,800 = 35.71%.

Calculate Payout Ratio Given the Following Information: Cash Dividends Paid