If a firm has a 100 percent dividend payout ratio, then the internal growth rate of the firm is:
A)zero percent.
B)100 percent.
C)equal to the ROA.
D)negative.
E)infinite.

Question

Quizplus · Accepted Answer

If a firm has a 100 percent dividend payout ratio, it means all earnings are paid out as dividends, leaving no retained earnings for reinvestment. Therefore, the internal growth rate, which depends on retained earnings, is zero percent.

If a Firm Has a 100 Percent Dividend Payout Ratio