Question

The ________ is the fraction of earnings reinvested in the firm.

a. dividend payout ratio
b. dividend payout ratio and plow back ratio
c. retention rate plow back ratio retention
d. rate or plow back ratio

Answer 1

C, retention rate and plow back ratio

Step-by-step explanation:

Retention rate can simply be said to be the ratio between retained earning and earnings at risk; i.e the rate of earnings that one is assured of as against the one you're not assured of. The same can be said about plow-back ratio. The plow-back ratio can be defined as the ratio of how much earnings are retained after dividends have been paid out.

This retained earnings are then reinvested into the firm to yield another dividends and the cycle continues.

Cheers.