Question
A company pays a dividend on common stock, thereby reducing its cash balances. What effect does payment of the dividend have on its leverage ratio
A company pays a dividend on common stock, thereby reducing its cash balances. What effect does payment of the dividend have on its leverage ratio and net profit margin?
| a. | Decreases debt /equity; decreases net profit/sales | |
| b. | Increases debt/equity; no effect on net profit/sales | |
| c. | Decreases debt/equity; increases net profit/sales | |
| d. | No effect on debt/equity; decreases net profit/sales |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
International Financial Management
Authors: Cheol Eun, Bruce Resnick
7th Edition
0077861604, 9780077861605
