Question

Colgate-Palmolive Company reports the following balances in its retained earnings.

($ millions)	2013	2012
Retained earnings	$14,329	$13,157

During 2013, Colgate-Palmolive reported net income of $2,211 million.

a. Assume that the only changes affecting retained earnings were net income and dividends. What amount of dividends did Colgate-Palmolive pay to its shareholders in 2013?
$Answer million

b. This dividend amount constituted what percent of its net income? (Round your answer to one decimal place.)
Answer%

Answer 1

a. Dividend paid in 2013: $1,039 million

• Ending retained earnings = Beginning retained earnings + Net income for the year - Dividend paid
• ∴ Dividend paid = Beginning retained earnings + Net income for the year - Ending retained earning = $13,157 million +  $2,211 million - $14,329 million = $1,039 million
• 
  2012 Retained earnings Opening balance Add: Net income Less: Dividend Ending balance $ $ $ $ 2013 13,157 2,211 1,039 14,329 $ 13,157
  amounts in millions
• Retained earnings are the profits earned and retained by an entity after distribution to shareholders.
• Ending balance of 2012 is the opening balance of 2013.

b. Dividend as a percent of the net income: 47%

Dividend Dividend as a % of net income = - X 100 = Net income $1,039 $2.211 X 100

• This is also called the Dividend Payout Ratio. It shows the percentage of the earnings paid out as dividend.