COST ACCOUNTING
PERFORMANCE MEASUREMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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ROA = ROE × (1 + Debt-equity ratio)
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Total asset turnover = 1 + Capital intensity ratio
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Equity multiplier = 1-Debt-equity ratio
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Dividend payout ratio = 1-Retention ratio
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Detailed explanation-1: -The dividend payout ratio evaluates the percentage of profits earned that a company pays out to its shareholders, while the retention ratio represents the percentage of profits earned that are retained by or reinvested in the company.
Detailed explanation-2: -The payout ratio is the amount of dividends the company pays out divided by the net income. This formula can be rearranged to show that the retention ratio plus payout ratio equals 1, or essentially 100%.
Detailed explanation-3: -The retention ratio is the portion of earnings kept back in a firm to grow the business as opposed to being paid out as dividends to shareholders. The payout ratio is the opposite of the retention ratio which measures the percentage of profits paid out as dividends to shareholders.
Detailed explanation-4: -Retention Ratio = 1-Dividend Payout Ratio Growth-oriented investors will prefer a high plowback ratio. Plowback ratio = 1 – (Annual Dividend Per Share/Earnings Per Share). read more implying that the business/firm has profitable internal usage of its earnings. This, in turn, would push up the stock prices.