AFB,Inc.'s dividend policy is to maintain a constant payout ratio.This year AFB,Inc.paid out a total of $2 million in dividends.Next year,AFB,Inc.'s sales and earnings per share are expected to increase.Dividend payments are expected to
A) remain at $2 million.
B) increase above $2 million.
C) decrease below $2 million.
D) increase above $2 million only if the company issues additional shares of common stock.

Question

Quizplus · Accepted Answer

Since AFB, Inc.'s dividend policy is to maintain a constant payout ratio, as the earnings per share increase, the dividend payments will also increase. Therefore, it is expected that the dividend payments will increase above $2 million in the next year.

AFB,Inc'S Dividend Policy Is to Maintain a Constant Payout Ratio