All Else the Same, If a Company Increases Its Retention

question 92

Multiple Choice

All else the same, if a company increases its retention ratio:

• A) the sustainable growth rate will increase.
• B) the stock price will increase since dividends decline.
• C) the company's cash flow will increase.
• D) the dividend yield will increase.
• E) the sustainable growth rate will decrease.

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Definitions:

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenue.

No-Par Common Stock

No-Par common stock is stock issued without a par value, meaning its value is determined by the price investors are willing to pay in the market, rather than a set face value.

Stated Value

Stated value refers to a fixed per-share value assigned by a corporation to its no-par value stock, often used in accounting and financial reporting.

Participating Right

A feature of certain securities that allows the holder to receive dividends or other benefits in addition to the basic rights associated with the security.