Dividend payout ratio shows relationship between dividend paid to equity shareholders out of profit available to the equity shareholders.
Purpose:
Purpose of this ratio is to measure the dividend paying capacity of the company.
Significance:
1) Higher ratio signifies that the company has utilized the larger portion of its earning for payment of dividend to equity shareholders.
2) It says lesser amount of earning has been retained.
Formula:
Components:
1) Dividend per equity shares means total dividend paid to equity shareholder dividend by number of equity shares.
2) Earning per shares refer to formula given above
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