Which ratio shows the proportion of earnings that are distributed to the shareholders?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Dividend Payout Ratio.
Dividend Payout Ratio refers to the proportion of earning that are distributed to the shareholders. This reflects company’s dividend policy and growth in owner’s equity. It is calculated as –
Dividend Payout Ratio = Dividend per share/ Earnings per share.
* Dividends per Share: The total dividend paid to shareholders divided by the number of outstanding shares.
* Earnings per Share: The net income or earnings of the company divided by the number of outstanding shares.