A Constant Payout Policy for Dividends Involves

question 4

Multiple Choice

A constant payout policy for dividends involves:

• A)a constant total amount of dividends paid each year.
• B)a constant ratio of dividends to profit and a constant amount of dividends paid from year to year.
• C)consideration given to profitable investment proposals.
• D)a constant ratio of dividends to profit but not a constant amount of dividends paid from year to year.

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Definitions:

Operating Leverage

A measure of how revenue growth translates into growth in operating income.

Percentage Change

A mathematical calculation that shows how much a quantity has increased or decreased as a percentage of its previous value.

Net Operating Income

The profit generated from normal business operations, excluding expenses from interest and taxes.

Contribution Margin Ratio

The proportion of sales revenue that exceeds variable costs, indicating how much contributes to covering fixed costs and generating profit.