Which of the following would be most likely to lead to a decrease in a firm's dividend payout ratio?
A) its access to the capital markets increases.
B) its r&d efforts pay off, and it now has more high-return investment opportunities.
C) its accounts receivable decrease due to a change in its credit policy.
D) its stock price has increased over the last year by a greater percentage than the increase in the broad stock market averages.
E) its earnings become more stable.

Question

Quizplus · Accepted Answer

If a firm's R&D efforts pay off and it now has more high-return investment opportunities, it may choose to reinvest more of its profits back into the business rather than pay out dividends. This would lead to a decrease in the dividend payout ratio.

None of the other choices would necessarily lead to a decrease in the dividend payout ratio. A) Access to capital markets increasing could potentially lead to more funds available for dividends. C) A decrease in accounts receivable would have no direct impact on the dividend payout ratio. D) Stock price increase would have no direct impact on the dividend payout ratio. E) More stable earnings could potentially lead to a higher dividend payout ratio if the firm feels more confident in maintaining the current level of dividends.

Which of the Following Would Be Most Likely to Lead