When a firm enters Stage IV of its life cycle,
A) dividend payout ratios are likely to rise to a moderate level of 20-30% of earnings.
B) the firm has reached maturity.
C) the organization must retain earnings in preparation for cycling back into Stage I of the life cycle.
D) stock splits are common.

Question

Quizplus · Accepted Answer

Stage IV is the maturity stage of a firm's life cycle. At this stage, the firm has already gone through the development, growth, and shakeout stages, and has reached a stable position in the market. Dividend payout ratios may be moderate, but the primary focus is on maintaining the company's position and maximizing profits. There is no need to retain earnings in preparation for cycling back into Stage I, as the firm is already established. Stock splits are also unlikely at this stage.

When a Firm Enters Stage IV of Its Life Cycle