Assume all else remains the same. Which of the following statements is true?
A) The lower the dividend payout, the less a firm will have to reinvest.
B) The higher the dividend payout, the more discretionary financing a firm will require.
C) The lower the dividend payout, the more discretionary financing a firm will require.
D) The higher the dividend payout, the higher the retention percentage.

Question

Quizplus · Accepted Answer

The higher the dividend payout, the less a firm retains for reinvestment, increasing its need for external or discretionary financing to fund any new projects or investments.

Assume All Else Remains the Same