A company earns profit after tax of Rs. 800,000 and pays ordinary dividends of Rs. 200,000. What is its dividend payout ratio?
Correct answer: B. 25%
- A. 20%
- B. 25%
- C. 40%
- D. 75%
Explanation
The dividend payout ratio is ordinary dividends divided by profit after tax, multiplied by 100. Rs. 200,000 divided by Rs. 800,000 equals 25 percent.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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