Question

which type of fit. is like to have a high dividend payout ratio policy? a. a...

which type of fit. is like to have a high dividend payout ratio policy?
a. a younger firm with uncertain income but significant growth opportunities.
b. an older firm with steady earnings but few growth opportunities.
c. an older firm with irregular income and significant growth opportunities
d. a younger firm with significant income and super normal positive growth opportunities

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Answer #1

option (b) i.e. an older firm with stedy earnings but few growth opportunities is the correct answer.

A company which has significant growth opprotunities is likely to reinvest more in its business. As a result of which, they are most likey to pay less dividend.

On the other hand, old company which has stedy earning but not enough growth opportunities to invest in will be most likely to distribute its earnings to its shareholders.

Incase of any doubt, please comment below. I would be happy to help.

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