In the percent-of-sales method, an increase in dividends
A) will increase required new funds.
B) will decrease required new funds.
C) has no effect on required new funds.
D) More information is needed.

Question

Quizplus · Accepted Answer

An increase in dividends reduces the amount of earnings that can be retained and reinvested in the firm, thus increasing the need for external financing or required new funds.

In the Percent-Of-Sales Method, an Increase in Dividends