Which One of the Following Statements Is Correct Concerning the External

question 73

Multiple Choice

Which one of the following statements is correct concerning the external financing need (EFN) and the dividend payout ratio? Assume EFN is a positive number.

• A) The dividend payout ratio has no effect on the EFN.
• B) An increase in the dividend payout ratio will decrease the EFN.
• C) An increase in the dividend payout ratio will increase the EFN.
• D) The effect on EFN caused by an increase in the dividend payout ratio cannot be predicted.
• E) An increase in EFN causes the dividend payout ratio to decrease.

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Definitions:

Rational Choice

A theory assuming individuals use logical calculations to make prudent decisions that provide them with the greatest benefit or satisfaction.

Facts

Data or information based on real occurrences or truths used for analysis, decision-making, or proving arguments.

Theories

Systematic ideas or principles formulated to explain phenomena, provide understanding, and predict future occurrences.

Macroeconomics

The branch of economics that studies the behavior and performance of an economy as a whole, focusing on aggregate phenomena such as GDP, unemployment rates, and inflation.