Determining the dividend payout ratio is shrinking

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Reference no: EM131766258

Question: Directions: Use the information below to answer the following question.

20Y1 20Y2 20Y3

Net profit after taxes $2,450 $2,980 $3,170

Cash dividends $600 $1,000 $1,500

Which one of the following is the correct conclusion to draw from the trend in the dividend payout ratio?

A) the dividend payout ratio is shrinking, which will most likely result in increased borrowing needs.

B) the dividend payout ratio is growing, so the business will most likely need to borrow less.

C) the dividend payout ratio is growing, which will most likely lead to increased borrowing needs.

D) the dividend payout ratio is shrinking, which means the business will most likely need to borrow less.

Reference no: EM131766258

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