BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Liquidity Ratio and Solvency Ratio
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Retention Ratio and Payout Ratio
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Profitability Ratio and Turn Over Ratio
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Activity Ratio and Liquidity Ratio
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Detailed explanation-1: -The dividend payout ratio evaluates the percentage of profits earned that a company pays out to its shareholders, while the retention ratio represents the percentage of profits earned that are retained by or reinvested in the company.
Detailed explanation-2: -Firm size and profitability are determinants of dividend policy, which affect the company’s dividend policy significantly and negatively. Leverage does not significantly affect the company’s dividend policy.
Detailed explanation-3: -The Dividend Payout Ratio (DPR) is the amount of dividends paid to shareholders in relation to the total amount of net income the company generates. In other words, the dividend payout ratio measures the percentage of net income that is distributed to shareholders in the form of dividends.
Detailed explanation-4: -Dividend decision relates to how much of the company’s net profit is to be distributed to the shareholders and how much of it should be retained in the business for meeting the investment requirements. This decision should be taken keeping in mind the overall objective of maximising shareholders’ wealth.