Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 13 - Financial Analysis: The Big Picture - Questions: 17

Answer

Payout ratio is a measure of the percentage of earnings distributed in the form of Cash dividend. Payout ratio can be calculated by using the below formulae: Payout ratio = Cash dividend declared/Net Income

Work Step by Step

For growth of the company, the ratio should be low, as the company will need more funds to invest in long term assets. If part of net income is reinvested, there will be fast growth in the company.
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