calculate maximum payout ratio

To calculate the maximum payout ratio, you'll need two pieces of information:

1. Net income: This is the total amount of profit earned by a company after deducting all expenses, taxes, and interest. You can find this information on the company's income statement.

2. Dividends: Dividends are the portion of a company's earnings that are distributed to its shareholders. You can find this information on the company's cash flow statement or in the notes to the financial statements.

Once you have these two numbers, you can calculate the maximum payout ratio using the following formula:

Maximum Payout Ratio = Dividends / Net Income

For example, if a company has net income of $1,000,000 and pays out $500,000 in dividends, the maximum payout ratio would be:

Maximum Payout Ratio = $500,000 / $1,000,000 = 0.5 or 50%

This means that the company is distributing 50% of its earnings as dividends, which is the maximum percentage it can afford to pay out without using any retained earnings or additional financing.