Calculate retention ratio given the following information: cash dividends paid = $19,950; sales = $250,000; cost of goods sold = $100,000; selling and administrative expenses = $50,000; interest
Expense = $5,000; tax rate= 30%.

Question

Quizplus · Accepted Answer

Retention ratio = (Net income - Dividends) / Net incomeNet income = Sales - Cost of goods sold - Selling and administrative expenses - Interest expense - TaxesNet income = $250,000 - $100,000 - $50,000 - $5,000 - ($250,000 - $100,000 - $50,000 - $5,000) * 0.30)Net income = $250,000 - $100,000 - $50,000 - $5,000 - $27,000Net income = $68,000Retention ratio = ($68,000 - $19,950) / $68,000Retention ratio = 0.70 or 70%

Calculate Retention Ratio Given the Following Information: Cash Dividends Paid