CFA Practice Question

There are 191 practice questions for this study session.

CFA Practice Question

This year, Flower Buds expects to pay a dividend of $0.60 per share on the 60,000 shares outstanding. Flower Buds expects to have a payout ratio of 40%. How much income does Flower Buds expect to earn?
A. $14,400
B. $60,000
C. $90,000
Explanation: Dividends = 60,000 x 0.60 = $36,000
Net Income = 36,000 / 0.4 = $90,000

User Contributed Comments 5

User Comment
lazio my head is blocked, I seem not to get it. Can someone clarify me on that, please?
vadklim Total dividends paid in terms of money will be usd 36 000 for all shares outstanding. Assuming 40% of the earnings is paid out as dividens the total earnings are 36 000 / 0.4 = usd 90 000
miene If the Company pays out a dividend of $0.60 per share and this figure correlates with 40% paid out then 60% or $0.90 per share is retained. Therefore total earnings per share are $0.90+ $0.60 = $1.50 per share.

so $1.50 x 60000 = 90000.00 earnings
jonnyp $.60/.40 *60,000=90,000
sumeetb DPR is Div/NI, So NI= Div/DPR
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