Question about dividend policy

Reference no: EM1373172

For each of the following 4-groups of companies, state whether you would expect them to distribute a relatively high or low proportion of current earnings and whether you would expect them to have a relatively high or low price-earnings ratio.

[A] High risk Firms.
[B] Firms that have recently experienced a temporary decline in profits.
[C] Firms that expect to experience a decline in profits.
[D] 'Growth' companies with valuable future investment opportunities.

'Risky firms tend to have lower target payout ratios and more gradual adjustment rates.' Describe what is meant by this statement. Why do you think it is so?

Reference no: EM1373172

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