Ferman Corporation had net income of $160,000 and paid dividends of $50,000 to common stockholders and $20,000 to preferred stockholders in 2014. Ferman Corporation's common stockholders' equity at the beginning and end of 2014 was $870,000 and $1,130,000, respectively. Ferman Corporation's payout ratio for 2014 was
A) 5.0%.
B) 43.8%.
C) 31.3%.
D) 12.5%.

Question

Quizplus · Accepted Answer

The payout ratio is calculated as dividends paid to common stockholders divided by net income. Here, it is $50,000 / $160,000 = 31.25%, which rounds to 31.3%.

Ferman Corporation Had Net Income of $160,000 and Paid Dividends