Ferman Corporation had net income of $140,000 and paid dividends of $40,000 to common stockholders and $20,000 to preferred stockholders in 2020.Ferman Corporation's common stockholders' equity at the beginning and end of 2020 was $870,000 and $1,130,000, respectively.Ferman Corporation's payout ratio for 2020 was
A)4.0%.
B)42.9%.
C)28.6%.
D)14.3%.

Question

Quizplus · Accepted Answer

The payout ratio is calculated as the total dividends paid to common stockholders divided by the net income. Here, the payout ratio is ($40,000 / $140,000) * 100 = 28.6%.

Ferman Corporation Had Net Income of $140,000 and Paid Dividends