The following financial information is available for Flounder Corporation. (in m

Question

The following financial information is available for Flounder Corporation.

(in millions)

2017

2016

Average common stockholders’ equity

Dividends declared for common stockholders

Dividends declared for preferred stockholders

Net income

Calculate the payout ratio and return on common stockholders’ equity ratio for 2017 and 2016. (Round answers to 1 decimal place, e.g. 12.5%)

2017

2016

Payout ratio

Return on common stockholders’ equity

(in millions)

2017

2016

Average common stockholders’ equity

$3,405 $3,505

Dividends declared for common stockholders

325 685

Dividends declared for preferred stockholders

35 35

Net income

650 715

Explanation / Answer

2017 2016 Payout ratio (325+35)/650 (685+35)/715 Payout ratio 55.4% 100.7% Return on common stockholders’ equity (650-35)/3405 (715-35)/3505 Return on common stockholders’ equity 18.1% 19.4%

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