Preferred vs. common dividend split: A company has 50,000 preferred shares (dividend at 20%) and 20,000 common shares; each share has par value $10. The company earns $180,000 profit, keeps $30,000 in reserves, and distributes the remainder as dividends. What is the dividend percentage paid to common shareholders?

Introduction / Context:
This question examines how profits are allocated between reserves and different classes of shares. Preferred dividends are usually paid first at their fixed rate; the remaining distributable profit is then paid to common shareholders, often expressed as a percentage on common share capital.

Given Data / Assumptions:

• Preferred shares = 50,000 at $10 par; preferred dividend rate = 20%.
• Common shares = 20,000 at $10 par.
• Total profit = $180,000; reserve kept = $30,000; distributable = $150,000.

Concept / Approach:
First compute the preferred dividend and deduct it from the distributable amount. The balance belongs to common shareholders. Divide that balance by common par capital to get the dividend percentage on common shares.

Step-by-Step Solution:

Verification / Alternative check:
Total paid as dividend = $100,000 (preferred) + $50,000 (common) = $150,000, matching the distributable amount after reserves.

Why Other Options Are Wrong:
24%, 20%, and 30% do not equal the exact $50,000/$200,000 ratio; 22.5% also does not match.

Common Pitfalls:
Forgetting to subtract reserves before calculating dividends or misallocating preferred dividend priority.

Final Answer:
25%