CS Executive · Corporate Accounting and Financial Management · Introduction to Financial Management
Ananya Textiles Ltd. has a net profit of Rs 60 lakh and 10 lakh equity shares outstanding. It declares a dividend of Rs 2.40 per share. What is its dividend payout ratio and retention ratio respectively?
EPS is Rs 6 (Rs 60 lakh divided by 10 lakh shares). Dividend of Rs 2.40 gives a payout ratio of 40%, so the retention ratio is the remaining 60%. Payout is dividend over earnings per share, and retention is its complement.
- A40% and 60%Correct
- B60% and 40%
- C24% and 76%
- D40% and 40%
Explanation
EPS = 60 lakh / 10 lakh = Rs 6. Payout = 2.40/6 = 40%. Retention = 100% - 40% = 60%. The option reversing them confuses the two ratios, and 24% wrongly treats Rs 2.40 as a percentage of something else.
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