Which of the following would be most likely to lead to a decrease in a firm's dividend payout ratio?
A) Its access to the capital markets increases.
B) Its R&D efforts pay off, and it now has more high-return investment opportunities.
C) Its accounts receivable decrease due to a change in its credit policy.
D) Its stock price has increased over the last year by a greater percentage than the increase in the broad stock market averages.
E) Its earnings become more stable.

Question

Quizplus · Accepted Answer

If a firm's R&D efforts pay off, it will have more high-return investment opportunities, which would likely lead to a decrease in the firm's dividend payout ratio. This is because the firm may prioritize reinvesting its earnings into these opportunities rather than paying out a portion of its earnings as dividends. Options A, C, D, and E do not necessarily have a direct impact on the firm's dividend payout ratio.

Which of the Following Would Be Most Likely to Lead