Question

A company had net income of $200,000 and paid dividends to common stockholders of $50,000 in 2022. The weighted average number of shares outstanding in 2022 was 2,000 shares. The company’s common stock is selling for $80 per share on the New York Stock Exchange. The company’s payout ratio for 2022 is ________ percent.

Answer 1

Answer:

25 percent.

Explanation:

Given that,

Net Income =$200,000

Paid dividends to common stockholders = $50,000

Weighted average number of shares outstanding in 2022 = 2,000 shares

Selling price of common stock = $80 per share

Dividend pay-out ratio:

= (Dividend paid to Common Stockholders ÷ Net Income) × 100

= ($50,000 ÷ $200,000) × 100

= 0.25 × 100

= 25%

Therefore, the company’s payout ratio for 2022 is 25 percent.