Question

All else equal, which of the following is most likely to increase a company's retained earnings breakpoint? a. An increase in the company's dividend payout ratio b. both factors will lead to an increase in the retained earnings breakpoint. c. A decrease in the fraction of equity used in the company's target capital structure

Answer 1

Answer: decrease in the fraction of equity used in the company's target capital structure

Explanation:

Retained earnings is the part of the net income that is left over for the business when the business has already paid out dividends to the shareholders. The retained earnings can be put back into the business.

A decrease in the fraction of equity used in the company's target capital structure will lead to an increase a company's retained earnings breakpoint.