Donovan’s would like to increase its internal rate of growth.Decreasing which one of the following will help the firm achieve its goal?
A)Return on assets
B)Net income
C)Retention ratio
D)Dividend payout ratio
E)Return on equity

Question

Donovan&rsquo;s would like to increase its internal rate of growth.Decreasing which one of the following will help the firm achieve its goal?
A)Return on assets
B)Net income
C)Retention ratio
D)Dividend payout ratio
E)Return on equity

Quizplus · Accepted Answer

The dividend payout ratio represents the portion of net income paid out to shareholders as dividends. By decreasing the dividend payout ratio, Donovan's would be retaining more earnings, which could be reinvested back into the business to fuel growth. This would in turn increase the firm's internal rate of growth.

Donovan’s Would Like to Increase Its Internal Rate of Growth