You Decide to Calculate Some Ratios to Assess the Safety

You decide to calculate some ratios to assess the safety of your firm's stock, which you hold in your profit-sharing plan. You find that the dividend coverage ratio is 0.85. What does this mean?

A) The firm pays a dividend of $0.85 quarterly.
B) The firm's dividend is 85% of other similar size firms in the same industry.
C) The firm paid 85% of the dividend out of current period earnings, the other 15% of the dividend came out of retained earnings.
D) The firm has a high dividend payout. It pays out 85% of its earnings, the other 15% are retained for use on investment projects.