Silas Corporation had net income of $200,000 and paid dividends to ordinary shareholders of $40,000 in 2014. The weighted average number of shares outstanding in 2014 was 50,000 shares. Silas Corporation's ordinary shares are selling for $50 per share on the New York Stock Exchange. Silas Corporation's payout ratio for 2014 is
A) $4 per share.
B) 25%.
C) 20%.
D) 12.5%.

Question

Silas Corporation had net income of $200,000 and paid dividends to ordinary shareholders of $40,000 in 2014. The weighted average number of shares outstanding in 2014 was 50,000 shares. Silas Corporation's ordinary shares are selling for $50 per share on the New York Stock Exchange. Silas Corporation's payout ratio for 2014 is
A) $4 per share. 
B) 25%.
C) 20%.
D) 12.5%.

Quizplus · Accepted Answer

Silas Corporation's payout ratio for 2014 is calculated as dividends paid divided by net income. 
Payout ratio = Dividends paid / Net income
Payout ratio = $40,000 / $200,000
Payout ratio = 0.2 = 20%
Therefore, the answer is C) 20%.

Silas Corporation Had Net Income of $200,000 and Paid Dividends