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What formula do I use to see how much a company's retained earnings increase?
I have read Chapter 18 in Block, Stanley and Hirt, Geoffrey (2005), foundations of Financial Management several times and do not understand how to answer this question-
Springsteen Music Company earned $820 million last year and paid out 20 percent of earnings in dividends. a) By how much did the company's retained earnings increase? b) With 100 million shares outstanding and a stock price of $50, what was the dividend yield? 820 X 20% = 164 100 X 50 = 5000 |
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Dividends come from earnings.
Beginning retained earnings + net income - dividends = ending retained earnings. If earnings are 820 and dividends are 164, how did did retained earnings increase? Dividend yield = dividend per share/market price per share. I would hope that equation is in your book. |
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