Two otherwise equal companies have significantly different dividend payout ratios. Which of the following statements is most likely to be correct? The company with higher the dividend payout ratio:
A) will have a higher inventory turnover ratio.
B) will have a lower inventory turnover ratio.
C) will have higher earnings growth.
D) will have lower earnings growth.

Question

Quizplus · Accepted Answer

A higher dividend payout ratio typically means the company is returning more profits to shareholders rather than reinvesting them into the business, which can lead to lower earnings growth.

Two Otherwise Equal Companies Have Significantly Different Dividend Payout Ratios