Firms with the ____ earnings growth tend to have the ____ dividend payout ratio.
A) highest; highest
B) highest; lowest
C) lowest; lowest
D) lowest; highest

Question

Quizplus · Accepted Answer

Firms with the highest earnings growth tend to reinvest their earnings back into the company for future growth opportunities, rather than paying out a high dividend to shareholders. Therefore, they have a lower dividend payout ratio. On the other hand, firms with lower earnings growth may have less investment opportunities and a greater portion of their earnings can be distributed as dividends, resulting in a higher dividend payout ratio.

Firms with the ____ Earnings Growth Tend to Have the ____

Firms with the Earnings Growth Tend to Have the