Holding the growth rate constant, the higher the company's payout ratio, the larger the amount of debt or equity financing needed.

Question

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If a company has a higher payout ratio, it means it is paying out a larger portion of its earnings as dividends. This leaves less money available for reinvestment in the business, which can lead to the need for additional debt or equity financing for growth.

Holding the Growth Rate Constant, the Higher the Company's Payout