Asked by Garrett Brown on May 08, 2024
Verified
All else the same, an increase in a firm's dividend payout ratio will decrease its internal growth rate.
Dividend Payout Ratio
A financial ratio that shows the proportion of earnings a company pays out to shareholders in the form of dividends.
Internal Growth Rate
The growth rate a firm can maintain with only internal financing.
- Understand the importance of the retention (plowback) ratio in financial expansion and strategy.
- Ascertain the components that affect a company's development and their association with fiscal strategies.
Verified Answer
AH
Abdul HazimMay 14, 2024
Final Answer :
True
Explanation :
An increase in a firm's dividend payout ratio means that the firm is distributing more of its earnings to shareholders as dividends, leaving less earnings to be reinvested back into the company for growth. This results in a decrease in the firm's internal growth rate.
Learning Objectives
- Understand the importance of the retention (plowback) ratio in financial expansion and strategy.
- Ascertain the components that affect a company's development and their association with fiscal strategies.
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