451FinanceMedium
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?
A40%
B12%
C25%
D60%
Correct answer
A. 40%
Explanation
Retention ratio = Net income – Dividend / Net income = 250 – 150 / 250 = 0.4 or 40%