Finance Learning exp.4

Aug 24th, 2014
Business & Finance
Price: $5 USD

Question description

Assume that a company earns $280,000 in profit for the year on $3 million in revenue. The board of directors decides to keep half to pay for dividends and to reinvest the rest in the company. Sixty percent of the retained earnings are invested in non-current assets and the rest is invested in working capital for growth.

Calculate, as a percentage of revenue, how much would be kept in the company for growth (i.e., working capital and non-current assets) and how much would be used to pay dividends.  Round to the nearest hundredth percent (two decimal places) but do not include the % symbol.

First split: (rounded)

50% for retained earnings  [ Select ]["4.7%", "9.3%", "2.8%", "1.9%"]

50% for dividends  [ Select ]["4.7%", "9.3%", "2.8%", "1.9%"]

Second split:(rounded)

60% of retained earnings for non-current assets  [ Select ]["2.8%", "1.9%", "4.7%", "9.3%"]

40% of retained earnings for current assets [ Select ]["1.9%", "2.8%", "4.7%", "9.3%"]

Tutor Answer

(Top Tutor) Daniel C.
School: New York University

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