During its first year of operation, the Ocean Breeze soda corporation issued 17,500 shares of $10 par common stock. At the end of the year, the corporation had a net income of $350,000. The board of directors declared a cash dividend of $5 per share. How much net income was distributed to the stockholders

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Business

Annabelle Perez

2 September, 09:54

During its first year of operation, the Ocean Breeze soda corporation issued 17,500 shares of $10 par common stock. At the end of the year, the corporation had a net income of $350,000. The board of directors declared a cash dividend of $5 per share. How much net income was distributed to the stockholders

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Humberto Hardy · Answer 1

25%

Explanation:

Dividend payout ratio defines how much net income should be distributed to a company's shareholders.

At first, we have to find the total cash dividend paid during the year.

Cash dividend = Dividend per share * Total number of shares

Cash dividend = $5 per share * 17,500 shares = $87,500

Again, we know, Dividend payout ratio = (Cash Dividend paid : Net Income) * 100

Given,

Cash Dividend paid = $87,500

Net Income = $350,000

Therefore, Dividend payout ratio = ($87,500 : $350,000) * 100

Dividend payout ratio = 0.25 * 100 = 25%