Petersen Company has a capital budget of $1.0 million. The company wants to maintain a target capital structure that is 60% debt and 40% equity. The company forecasts that its net income this year will be $500,000. If the company follows a residual distribution model and pays all distributions as dividends, what will be its payout ratio?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Petersen Company has a capital budget of $1.0 million. The company wants to maintain a target capital structure that is 60% debt and 40% equity. The company
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