Loose Leaf for Foundations of Financial Management Format: Loose-leaf
Loose Leaf for Foundations of Financial Management Format: Loose-leaf
17th Edition
ISBN: 9781260464924
Author: BLOCK
Publisher: Mcgraw Hill Publishers
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Chapter 18, Problem 6P

Planetary Travel Co. has $240,000,000 in stockholders' equity. Eighty million dollars is listed as common stock and the balance is in retained earnings. The firm has $500,000,000 in total assets and 2 percent of this value is in cash. Earnings for the year are $40,000,000 and are included in retained earnings.

a. What is the legal limit on current dividends?

b. What is the practical limit based on liquidity?

c. If the company pays out the amount in part b, what is the dividend payout ratio? (Compute this based on total dollars rather than on a per share basis because the number of shares is not given.)

Payout ratio  =  Dividends/Earnings

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Earnings per share (EPS), basic and diluted; Author: Bionic Turtle;https://www.youtube.com/watch?v=i2IJTpvZmH4;License: Standard Youtube License