Question:
The proportion of a companys earnings paid out to its shareholders in the form of dividends is called the company's dividend payout ratio. A frequency distribution of dividend payout ratios (expressed as percentages) for a sample of 125 companies is shown in the following table. Ten of these companies paid no dividend.
Dividend payout ratio (%) Frequency
0 up to 10 13
10 up to 20 7
20 up to 30 10
30 up to 40 23
40 up to 50 28
50 up to 60 21
60 up to 70 14
70 up to 80 5
80 up to 90 3
90 up to 100 1
Part (a):
Using a significance level of 10%, test the hypothesis that dividend payout ratios are normally distributed. (HINT: Combine the three highest classes, since the expected frequencies of the two highest classes are small).
Part (b):
Repeat part (a), considering only companies that paid a dividend. (HINT: Combine the two lowest and three highest classes, since the expected frequencies are small).