Lucas Inc. earned $15 million last year and retained $6 million. Lucas has 5 million shares outstanding, and the current price of Lucas shares is $30 per share. What is the payout ratio?

Question

Quizplus · Accepted Answer

The payout ratio is calculated as (Dividends / Earnings) * 100. Lucas retained $6 million, so it paid out $9 million in dividends ($15 million - $6 million). The payout ratio is ($9 million / $15 million) * 100 = 60%.

Lucas Inc Earned $15 Million Last Year and Retained $6 Million