Differential growth refers to a ﬁrm that increases its dividend by:
A)three or more percent per year.
B)a rate which is most likely not sustainable over an extended period of time.
C)a constant rate of two or more percent per year.
D)€.10 or more per year.
E)an amount in excess of €.10 a year.

Question

Quizplus · Accepted Answer

Differential growth refers to a firm that increases its dividend at a rate which is most likely not sustainable over an extended period of time. This means that the dividend growth rate is higher than the historical average or higher than the earnings growth rate of the company. It may be due to temporary factors such as a windfall gain, a change in accounting practices, or a one-time event. Therefore, option B is the best choice as it aligns with the definition of differential growth.

Differential Growth Refers to a ﬁRm That Increases Its Dividend