Compnay characteristic Dividend payout ratio and PE ratio
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Dividend Policy.
For each of the following four 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 companies.
b. Companies that have recently experienced a temporary decline in profits.
c. Companies that expect to experience a decline in profits.
d. "Growth" companies with valuable future investment opportunities.
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Solution Summary
This problem answers what would be the likely dividend payout ratio and PE ratio for companies with different characteristics.
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a. High-risk companies.
Distributes a relatively low proportion of current earnings to offset fluctuations in operational cash flow; lower P/E ratio.
b. Companies that ...
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