Miley Corporation had net income of €250,000 and paid dividends to ordinary shareholders of €50,000 in 2014. The weighted average number of shares outstanding in 2014 was 50,000 shares. Miley Corporation's ordinary shares are selling for €40 per share on the New York Stock Exchange. Miley Corporation's payout ratio for 2014 is
A) 25%.
B) 20%.
C) 12.5%.
D) $5 per share.

Question

Quizplus · Accepted Answer

The payout ratio is the proportion of earnings paid out as dividends. 
Payout ratio = Dividends / Net income 
Payout ratio = 50,000 / 250,000 
Payout ratio = 0.2 or 20%

Miley Corporation Had Net Income of €250,000 and Paid Dividends