Which type of firm described is likely to have a high dividend payout ratio policy?
A)A younger firm with uncertain income but significant growth opportunities.
B)An older firm with steady earnings but few growth opportunities..
C)An older firm with irregular income and significant growth opportunities.
D)A younger firm with significant income and super normal positive growth opportunities.

Question

Quizplus · Accepted Answer

An older firm with steady earnings but few growth opportunities is likely to have a high dividend payout ratio policy. This is because such a firm has fewer investment opportunities, so it can distribute a larger portion of its earnings as dividends to its shareholders. A younger firm with uncertain income but significant growth opportunities would need to retain more of its earnings to reinvest in its growth, and a firm with irregular income may not have consistent cash flows to support a high dividend payout ratio. A younger firm with significant income and super normal positive growth opportunities may also choose to retain more of its earnings to fund future growth.

Which Type of Firm Described Is Likely to Have a High