Which of the following statements is true regarding corporate performance ratios?
A)A high payout ratio may indicate that a company is retaining earnings for future growth investments.
B)As a company grows larger, it is easy to sustain a high return on common stockholder's equity.
C)Return on common stockholder's equity is often higher under bond financing rather than common stock financing.
D)Low growth rates are characterized by low payout ratios.

Question

Quizplus · Accepted Answer

Bond financing can lead to a higher return on common stockholder's equity because it allows a company to leverage debt, potentially increasing returns for equity holders if the company earns more on its investments than the cost of the debt.

Which of the Following Statements Is True Regarding Corporate Performance