- CFA Exams
- CFA Level I Exam
- Topic 4. Corporate Issuers
- Learning Module 16. Analysis of Dividends and Share Repurchases
- Subject 5. Payout policies
CFA Practice Question
A firm follows a constant dividend payout ratio policy. If their earnings increase by 25 percent, their dividends will increase by ______ percent.
B. 25
C. 50
A. 0
B. 25
C. 50
Correct Answer: B
When a firm has a constant dividend payout ratio policy, the growth rate in the dividends will be the same as the growth rate in earnings.
User Contributed Comments 2
| User | Comment |
|---|---|
| haarlemmer | In reality, management tends to act in a fashion different than this. More conservative manner will be taken. |
| SueLiu | Generally not a constant div. payout policy but a stable div policy. |