Determining whether a company will retain its earnings.
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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
The solution determines whether a company will retain its earnings.
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a) High risk companies might go under so they will retain as much earnings as possible to survive the troubles ahead. Therefore, it would distribute a relatively low proportion of its current ...
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