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.
