A Company That Wants to Maintain Both a Constant Growth

question 76

Multiple Choice

A company that wants to maintain both a constant growth rate in dividends and a constant payout ratio will have to

• A) grow earnings faster than dividends.
• B) increase assets at the same rate as dividends.
• C) grow earnings at the same rate as dividends.
• D) increase stockholders' equity at the same rate as dividends.

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Definitions:

Efficient Markets

Markets in which all relevant information is fully and immediately reflected in asset prices, ensuring that securities are always fairly priced.

Profit Opportunities

Situations or conditions that allow businesses or individuals to earn a return on investment above normal expectations.

Eliminated

Removed or taken away, typically referring to the action of completely doing away with something.

Economic Losses

Financial losses incurred by businesses or individuals, often resulting from poor decisions or market conditions.