ABC Inc. has net income of $2,480,000. The firm has 500,000 shares of common stock outstanding. The dividend that is being paid for this year is $0.1984 per share. What is the retention ratio?

Question

Quizplus · Accepted Answer

The retention ratio is calculated by subtracting the dividend payout ratio from 1. First, calculate the total dividends paid: 500,000 shares * $0.1984/share = $99,200. Then, calculate the dividend payout ratio: $99,200 / $2,480,000 = 0.04. Finally, calculate the retention ratio: 1 - 0.04 = 0.96. However, none of the options match this calculation, suggesting a misunderstanding in the question's setup or a mistake in the calculation. Given the options, none directly align with the standard calculation method for retention ratio based on the provided data. Re-evaluating with the correct approach or assuming a typo in the options, the closest or intended answer cannot be determined without further clarification.

ABC Inc Has Net Income of $2,480,000