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What is Payout Ratio
Payout Ratio is a term that indicates how large share of generated net profit after tax is paid out to shareholders and how much is used for reinvestment.

Payout Ratio is a term that indicates how a large share of the generated net profit after tax is paid out to shareholders and how much is used for reinvestment.

Calculation:

Payout Ratio = Dividend per Share / Earnings per Share

Use of the Payout ratio in practice: The ratio reflects the dividend policy of the company. It is one of the strategic decisions of its management. It is an input to other ratios.

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Last update: 01.04.2016

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