Investors Prefer Firms That Retain Most of Their Earnings, Then

question 13

True/False

investors prefer firms that retain most of their earnings, then a firm that wants to maximize its stock price should set a low payout ratio.

---

Definitions:

Production Capacity

The maximum amount of goods or services that can be produced in a given time period with available resources.

Materials Markup

An amount added to the cost of materials to cover overhead and profit in the pricing of products.

Time and Materials Pricing

A billing method where customers are charged based on the actual time spent on a project and the cost of materials used.

Salvage Value

The estimated residual value of an asset at the end of its useful life.