A firm has paid Rs. 150,000 in dividends out of a net income of Rs. 250,000. What is its retention ratio?
Correct answer C. 40%
Explanation
Retained earnings are Rs. 250,000 minus Rs. 150,000, which is Rs. 100,000, and dividing this by net income of Rs. 250,000 gives a retention ratio of 40%.
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