If the payout ratio is .40 and dividends are 40, then the net income is a.80...

Question

Question

If the payout ratio is .40 and dividends are 40, then the net income is

a.80

b.100

c.120

d.160

Answer 1

Answer #1

Option (b) is correct

Dividend is calculated as:

Dividend = Net income * payout ratio

Putting the values in the above formula, we get,

40 = Net income * 0.4

Net income = 40 / 0.4 = 100

Answer 2

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