When the Firm Has a High Retention Ratio,thus Paying Low

question 125

Multiple Choice

When the firm has a high retention ratio,thus paying low dividends,the dividend is a by-product of what kind of decision?

• A) Borrowing
• B) Debt policy
• C) Financing
• D) Capital budgeting

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Definitions:

Variable Costs

are expenses that change in proportion to the activity of a business, such as the cost of raw materials used in production.

Differential Costs

The difference in total cost that will result from selecting one alternative over another.

Fixed Costs

Fixed costs include payments like rent, salaries, and insurance that are unaffected by variations in production or sales volumes.

Straight-Line Depreciation

A method of calculating the depreciation of an asset by evenly spreading its cost over its useful life.