Mama Inc. utilizes the residual dividend model to determine its ordinary dividend payout. This year the company expects its net income to be P2,000,000, and it expects to retain 75% of the income. The company’s target ordinary equity ratio is 40%, and the firm is financed with only ordinary equity and debt. 1. How much is the addition to retained earnings? 2. What is the plow back ratio? 3. What is the company’s forecasted total capital budget for the year?

Mama Inc. utilizes the residual dividend model to determine its ordinary dividend payout. This year the company expects its net income to be P2,000,000, and it expects to retain 75% of the income. The company’s target ordinary equity ratio is 40%, and the firm is financed with only ordinary equity and debt. 1. How much is the addition to retained earnings? 2. What is the plow back ratio? 3. What is the company’s forecasted total capital budget for the year?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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