How a Firm Splits Its Income Between Retained Earnings and Dividends

question 113

True/False

How a firm splits its income between retained earnings and dividends does not affect its rate of growth,which is determined by the firm's basic earning power.

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Definitions:

Required Return

The basic yearly rate of return essential for inducing companies or individuals to invest money into a specific project or security.

Annual Dividend

The total dividend payment a shareholder will receive from a company in a single year, per share owned.

Rate Of Return

The success or failure of an investment over a tailored period, represented in terms of the percentage of the investment's cost price.

Preferred Stock

A type of stock that provides a fixed dividend before any dividends are paid to common stockholders and typically has priority over common stock in the event of bankruptcy.