What Effect on the Growth Rate of Earnings Can Be

question 32

Multiple Choice

What effect on the growth rate of earnings can be accomplished by decreasing the dividend-payout ratio from 70 percent to 40 percent if the firm has an ROE of 20 percent?

• A)The growth rate can increase from 6 percent to 10.5 percent
• B)The growth rate can increase from 6 percent to 12 percent
• C)The growth rate can increase from 8 percent to 14 percent
• D)The growth rate can increase from 11 percent to 14 percent current growth rate in earnings = plowback ratio x ROE
• = )3 x .2 = 6%

---

Definitions:

Mechanistic Organizational Structure

A highly formal, rigid, and bureaucratic structure characterized by centralized decision-making, clear divisions of labor, and strict hierarchies.

Formalization

The process of standardizing policies and procedures within an organization.

Hostile Environment

A work or social environment that is intimidating, unfriendly, or offensive, often due to harassment or discriminatory practices.

Organic Structure

A flexible, decentralized organizational structure with low levels of formalization.