Which of the following is measured by retention ratio?
Correct answer: D. Dividend policy
- A. Operating efficiency
- B. Asset use efficiency
- C. Financial policy
- D. Dividend policy
Explanation
The retention ratio shows the proportion of earnings kept in the business rather than distributed as dividends, so it reflects dividend policy. It is commonly calculated as 1 minus the dividend payout ratio.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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