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This query is : Open
30 November 2009
Under the common sense approach to dividend model, if the company is in its growth stage and R>K (return on investment > cost of equity), why the payout ratio should be 0%? If the company's return on investment is greater than cost of equity,why the company is not paying dividend to its shareholders?
01 December 2009
As the company is in its growth stage it requires funds for expanding its activities , the return on equity is kept for that requirement that's why in this model dividend payout is zero.
01 December 2009
Thanks sir, then if its in decline stage, at this point R
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