When the firm has a high retention ratio, the dividend is a by-product of what kind of decision?
A) Borrowing
B) Debt policy
C) Financing
D)Capital budgeting

Question

Quizplus · Accepted Answer

A high retention ratio means that the firm is retaining a large portion of its earnings to fund capital budgeting projects instead of distributing them as dividends to shareholders. Therefore, the decision to pay dividends becomes a by-product of the capital budgeting decision, rather than a separate financing or debt policy decision.

When the Firm Has a High Retention Ratio, the Dividend