Uhri Corporation has provided the following data:
Dividends on common stock during Year 2 totaled $4,000.The market price of common stock at the end of Year 2 was $6.08 per share.The company's dividend payout ratio for Year 2 is closest to:
A) 7.8%
B) 1.3%
C) 11.1%
D) 0.8%

Question

Uhri Corporation has provided the following data:
 Dividends on common stock during Year 2 totaled $4,000.The market price of common stock at the end of Year 2 was $6.08 per share.The company's dividend payout ratio for Year 2 is closest to:
A) 7.8% 
B) 1.3% 
C) 11.1% 
D) 0.8%

Quizplus · Accepted Answer

Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $36,000 ÷ 80,000 shares = $0.45 per share (rounded)
*Number of common shares outstanding = Common stock ÷ Par value
= $320,000 ÷ $4 per share = 80,000 shares
Dividend payout ratio = Dividends per share* ÷ Earnings per share
= $0.05 ÷ $0.45 = 11.1% (rounded)
*Dividends per share = Common dividends ÷ Common shares (see above)
= $4,000 ÷ 80,000 shares = $0.05 per share (rounded)

Uhri Corporation Has Provided the Following Data