A firm's earnings per share increased from $10 to $12, its dividends increased from $4 to $4.40, and its share price increased from $80 to $100. Given this information, it follows that ________.

Question

Quizplus · Accepted Answer

The dividend payout ratio is calculated as dividends per share divided by earnings per share. Initially, it was $4/$10 = 0.4 or 40%. After the change, it became $4.40/$12 = 0.3667 or 36.67%. This shows a decrease in the dividend payout ratio, as the earnings per share increased by a higher percentage than the dividends per share.

A Firm's Earnings Per Share Increased from $10 to $12