What ratio measures the proportion of total earnings distributed to equity shareholders in the form of cash dividends?
ARetention Ratio (Plowback Ratio)
BDividend Payout Ratio
CDividend Yield
DEarnings Yield
Explanation
• Dividend Payout Ratio formula: $text{Payout Ratio} = frac{text{Dividends Per Share (DPS)}}{text{Earnings Per Share (EPS)}}$.
• Retention Ratio (Plowback Ratio) equals $1 – text{Dividend Payout Ratio}$.
• High-growth companies typically exhibit low dividend payout ratios to reinvest earnings into expanding operations.
Exam Relevance
- Topic: Financial Statement Analysis
- Subtopic: Dividend Ratios
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