In this example, the firm pays half of its earnings as dividends to its stockholders and retains the other half. This is done for simplicity here, but real firms weigh a multitude of factors in setting their dividends. This issue will be covered in your finance course.

Check Your Understanding

The gross margin for this fictional company is:

$9\mathrm{.}2\%$

$60\mathrm{.}3\%$

$14\mathrm{.}7\%$

$33\mathrm{.}3\%$

$18\mathrm{.}2\%$