An Increase in the Retention Ratio Will

question 106

Multiple Choice

An increase in the retention ratio will:

• A)increase the dividends per share.
• B)decrease a firm's sustainable rate of growth.
• C)decrease the equity of a firm.
• D)increase the dividend growth rate.
• E)increase the value of a firm's stock.

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Definitions:

Dividend Yield Ratio

An economic ratio that illustrates the yearly dividend disbursement of a company as a percentage of its stock value.

Net Profit Margin

A financial ratio that shows the percentage of profit a company makes for each dollar of sales, after all expenses are deducted.

Return on Equity

A measure of a corporation's profitability that calculates how much profit a company generates with the money shareholders have invested.

Price/Earnings Ratio

A valuation ratio of a company's current share price compared to its per-share earnings, used to evaluate if a stock is over or undervalued.