Last year, Teresa's Fashions earned $2.03 per share and had 15,000 shares of stock outstanding.The firm paid a total of $16,672 in dividends.What is the retention ratio?
A)45.25 percent
B)64.07 percent
C)52.00 percent
D)40.21 percent
E)54.75 percent

Question

Quizplus · Accepted Answer

The retention ratio is calculated as (1 - (dividends paid / net income)). In this case, the dividends paid were $16,672 and the net income was $2.03 * 15,000 = $30,450. Therefore, the retention ratio is (1 - (16,672 / 30,450)) = 45.25%.

Last Year, Teresa's Fashions Earned $2