Question

Guo Company has stockholders’ equity of $400,000 and net income of $66,000. It has a payout ratio of 20% and a return on assets of 15%. How much did Guo pay in cash dividends, and what were its average assets.

Answer 1

Answer:

Dividends paid=$132

Average total assets=$440.000

Explanation:

1. You must follow the formula below to find out the Dividends Paid by Guo Company

Payout ratio = (dividends paid/net earnings for the period) x 100 then,

Dividends paid= (Payout Ratio/100) x net earnings for the period

Dividends paid= (20%/100)x$66.000

Dividends paid=$132

     2. You must follow the formula below to find out the Average total assets

Return Over Assets =( Net Income/  Average total Assets) then,

Average total assets= (Net income/Return Over Assets)

Average total assets= ($66.000/15%)

Average total assets=$440.000