For each of the companies described here, would you expect it to have a low, medium, or high dividend-payout ratio? Explain why. a. A company with a large proportion of inside ownership, all of whom are high-income individuals b. A growth company with an abundance of good investment opportunities c. A company that has high liquidity and much unused borrowing capacity and is experiencing ordinary growth d. A dividend-paying company that experiences an unexpected drop in earnings from an upward-sloping trend line e. A company with volatile earnings and high business risk

For each of the companies described here, would you expect it to have a low, medium, or high dividend-payout ratio? Explain why. a. A company with a large proportion of inside ownership, all of whom are high-income individuals b. A growth company with an abundance of good investment opportunities c. A company that has high liquidity and much unused borrowing capacity and is experiencing ordinary growth d. A dividend-paying company that experiences an unexpected drop in earnings from an upward-sloping trend line e. A company with volatile earnings and high business risk

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 41MCQ

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Similar questions

For each of the companies described here, would you expect it to have a low, medium, or high dividend-payout ratio? 1. A company with a large proportion of inside ownership, all of whom are high-income individuals? A. Low dividend-payout ratio B. Medium or high dividend-payout ratio. 2. A growth company with an abundance of good investment opportunities? A. Low dividend-payout ratio B. Medium or high dividend-payout ratio. 3. A company that has high liquidity and much unused borrowing capacity and is experiencing ordinary growth? A. Low dividend-payout ratio B. Medium or high dividend-payout ratio. 4. A company with volatile earnings and high business risk? A. Low dividend-payout ratio B. Medium or high dividend-payout ratio.
For each of the companies described here, would you expect it to have a low, medium, or high dividend-payout ratio? Explain why. d. A dividend-paying company that experiences an unexpected drop in earnings from an upward-sloping trend line e. A company with volatile earnings and high business risk
Why would a company choose to have a low dividend payout ratio? A.The company has many investment opportunities with high growth potential B.The company has few investment opportunities and they have low growth potential C.The company has very low profits D.The company has very high profits E.The board of directors has decided to do so. B,C only A,C,Eonly B,D,Eonly B,C,Eonly A, C, Donly
For each of the companies described here, would you expect it to have a low, medium, or high dividend-payout ratio? 4. A company with volatile earnings and high business risk? A. Low dividend-payout ratio B. Medium or high dividend-payout ratio.
Except for one of the following the constant dividend growth model is useful to corporate managers because: a. the required rate of return of shareholders is related to the company's level of risk as perceived by investors. b. the dividend stream is influenced by earnings and profitability as well as the dividend policy of management c. the growth rate is related to the efficiency of the company in generating returns on equity d. inflation calculations are incorporated in the model
Would you expect a company in a rapidly growing technological industry to have a high or low dividend payout ratio?
A company’s dividend policy can also be affected by factors internal to the organization and by the external (macroeconomic) environment in which the business operates. In the table that follows, identify which factors, in general, tend to favor high or low dividend payout ratios. Factor Favors a High Payout Favors a Low Payout A company has a large retained earnings balance on its balance sheet but has very little cash and almost no other liquid assets. A company has an established credit line that it can access when it needs an external source of funding. A closely held firm has a majority of its shareholders in high marginal tax brackets. Each factor higher or lower payout Having the ability to accelerate or delay projects makes it easier or harder for a firm to adhere to a stable dividend policy. If management is concerned with keeping control of the company, it will be likely to retain more or less earnings than…
You observe that a firm?s profit margin is below the industry average, while its return on equity and debt ratio exceed the industry average. What can you conclude?
Which of the following situation in which the quality of the company’s pay-out to shareholders may decline a. Decrease in cash position b. Increase in positive NPV investment opportunities c. Increase in capital gains tax d. Decrease in marginal tax rate on dividends Which of the following concepts tells us that dividends are to be paid only when the capital budget has been already supplied? a. Gordon Growth model b. Dividend irrelevance theory c. Retain Earnings break-point principle d. Residual Dividend Model
Explain the principal problem involved in using a dividend valuation model to value: i. companies whose operations are closely correlated with economic cycles. ii. companies that are of very large and mature. iii. companies that are quite small and are growing rapidly. Assume that all companies pay dividends.
Which of the following typically is true for profitability ratios? a. Growth stocks have lower price to earnings ratios.b. Companies in more competitive industries have higher profit margins.c. The gross profit ratio declines as competition increases.d. When a company has debt, its return on equity will be lower than its return on assets.
Is this statement true or false? Give a reason for your answer. "The bird-in-hand theory suggests that a company can reduce its cost of equity capital by reducing its dividend payout ratio."