In general, the higher the retention ratio
A) the higher the future growth rate of the company.
B) the higher the dividends per share of common stock.
C) the higher the future debt-equity ratio.
D) the lower the future book value per share.

Question

Quizplus · Accepted Answer

The retention ratio, which is the proportion of earnings not paid out as dividends but retained by the company, is directly related to the company's ability to reinvest in its operations and thus potentially increase its future growth rate. Higher retention means more funds are available for investment in profitable projects, leading to growth.

In General, the Higher the Retention Ratio