What is dividend Payout Ratio?

Dividend Payout Ratio:-

 

Corporations Payout a portion of their earnings as dividend to the shareholders and retain a portion of earnings as retained earnings. The portion of earnings paid as dividend to the shareholders divided by net income is called dividend payout ratio. 

For example XYZ a company has BDT 100000 as net income. It distributes BDT 40000 as dividend to its common shareholders so the dividend payout ratio of XYZ Company will be-

Payout ratio = Dividend / Net income

                   = 40000/100000

                   = 40%

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What are primary market and Secondary market

Primary Market:-

Primary market is a market for issuing new securities by companies.

Secondary Market:-

Secondary market is a market where already issued securities are traded among investors.

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What is the basic accounting equation

Basic Accounting Equation:-

The basic accounting equation is

Asset = Liabilities + Owners Equity

For every journal entry the equation should always be in a balanced situation. Broadly every transaction in a business entity must affect Assets, liabilities or owners equity.

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What are Cash dividend and stock dividend

Cash Dividend:-

If the dividend is paid in the form of cash to the shareholders, it is called cash dividend. It is paid periodically from earnings available to common stockholders. Cash dividends are common and popular types of dividend.

Stock Dividend:-

Stock dividend is paid in the form of the company stock. Under this type, cash is retained by the business concern. Stock dividend is bonus issue. This issue is given only to the existing shareholders of the company at a certain percentage. For example if a person have 200 no. of shares of a company and the company declares a 10% stock dividend then the person will get additional (200 * 10% = 20) 20 shares as a stock dividend.

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What are over absorption and under absorption of overheads

Over absorption of overheads: - When applied factory overhead is greater than the actual factory overhead then it is called over absorption or over applied factory overhead. It is also called favorable overhead.

Under absorption of overheads:- When actual factory overhead is greater than the applied factory overhead then it is called under absorption or under applied factory overhead. It is also called unfavorable overhead.

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What are Gross Profit and Net Profit

Gross Profit: - Gross profit is the difference between sales and cost of goods sold. That means when we deduct cost of goods sold from sales we will get gross profit. We can calculate cost of goods sold by using the following formula.

Cost of goods sold = Opening stock + Purchase – Closing Stock.

Net Profit: - When we deduct all operating, non operating expenses and income tax from gross profit we will get Net profit or net income.

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