A firm has paid out Rs. 150,000 as dividends from its net income of Rs. 250,000. What is the retention ratio for the firm?
Correct answer: C. 40%
- A. 12%
- B. 25%
- C. 40%
- D. 60%
Explanation
Retained income equals Rs. 250,000 − Rs. 150,000 = Rs. 100,000. Dividing this by net income gives Rs. 100,000/Rs. 250,000 = 40%.
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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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