Managerial Accounting (15th Edition)

Published by McGraw-Hill Education
ISBN 10: 007802563X
ISBN 13: 978-0-07802-563-1

Chapter 15 - Financial Statement Analysis - Questions - Page 697: 15-4

Answer

In case of a growing technological company, we would expect to have a low dividend payout ratio.

Work Step by Step

Since we are referring to a rapidly growing tech company, it means that it will have numerous opportunities to make investments at a ROR (rate of return) higher than stockholders could earn in other investments. Because of that, it would bring more benefits for the company to invest in these opportunities rather than pay out dividends.
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