Firm increases dividend payout ratio

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Reference no: EM131924019

1. Under the percentage of sales forecast, what would happen if a firm increases its dividend payout ratio next year from 50% to 60%? (Assume no other changes.)

I. retained earnings would be higher

II. retained earnings would be lower

III. net new financing would be higher

IV. net new financing would be lower

A) II and III only

B) I and IV only

C) II and IV only

D) I and III only

2. Under the percentage of sales forecasting method, which of the following will impact the forecasted stockholder’s equity balance at the end of next year if net new financing is satisfied through long-term debt borrowings?

I. net income

II. long-term debt

III. dividends

IV. net new financing

A) I, III, and IV only

B) I, II, and III only

C) I and III only

D) I and IV only

E) III and IV only

Reference no: EM131924019

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