Rapid Sign Corporation Selected data from the financial statements are presented below:
$\begin{array}{lll}
& \underline{ 2015 }& \underline { 2014 }\
\text { Net income } &\$ 110,000 & \$ 123,000 \
\text { Cash dividends paid on common stock } &42,000 & 38,000 \
\text { Average number of common shares outstanding } &140,000 & 145,000 \
\text { Treasuy Stock } &70,000 & 0 \
\text { Market price per share of common stock at year-end } &16.00 & 13.00
\end{array}$
-Refer to Rapid Sign Corporation.What is the total payout ratio for 2015?
A)102%
B)88%
C)66%
D)30%

Question

Rapid Sign Corporation Selected data from the financial statements are presented below:
$\begin{array}{lll}
&  \underline{ 2015 }&  \underline { 2014 }\
\text { Net income } &\$ 110,000 & \$ 123,000 \
\text { Cash dividends paid on common stock } &42,000 & 38,000 \
\text { Average number of common shares outstanding } &140,000 & 145,000 \
\text { Treasuy Stock } &70,000 & 0 \
\text { Market price per share of common stock at year-end } &16.00 & 13.00
\end{array}$ 
-Refer to Rapid Sign Corporation.What is the total payout ratio for 2015?
A)102%
B)88%
C)66%
D)30%

Quizplus · Accepted Answer

The total payout ratio is calculated as the sum of dividends paid and stock repurchase, divided by the net income.

In this case, the dividends paid on common stock is $42,000, and there is $70,000 treasury stock (stock repurchase).

So the total payout is $42,000 + $70,000 = $112,000.

The net income is $110,000.

Therefore, the total payout ratio for 2015 is:

Total Payout Ratio = Total Payout / Net Income = $112,000 / $110,000 = 1.02

Therefore, the answer is A) 102%.

Rapid Sign Corporation Selected Data from the Financial Statements Are