Dividend payout ratio is which of the following types of ratio?

Correct option is D

The Dividend Payout Ratio measures the portion of net profit that a company distributes to its shareholders in the form of dividends. It is calculated as:

Because it assesses how effectively a company converts earnings into shareholder returns, it is classified under Profitability Ratios. Profitability ratios evaluate a company’s ability to generate profits relative to sales, equity, or assets. The dividend payout ratio directly reflects management’s profit distribution policy, making (d) Profitability the correct answer.
Information Booster
1. A high dividend payout ratio indicates a stable or mature company with predictable earnings.
2. A low payout ratio suggests the company is retaining profits for reinvestment or expansion.
3. It helps investors assess the sustainability of future dividends.
4. Dividend payout is closely linked with earnings stability and company liquidity.
5. Profitability ratios include net profit ratio, return on equity, return on assets, and earnings per share.