Question 1- U.S. public companies with "low" dividend payouts have payout ratios of less than 1 percent, firms with "medium" payouts have ratios between 1 and 48 percent, and "high" payout firms have a ratio of 49 percent or more. Given these data, how would you classify the following firms in terms of their optimal payout policy (high, medium, or low)?
Successful Pharmaceutical Company
Electric Utility
Manufacturer of Consumer Durables
Commercial Bank
Start-Up Software Company
Question 2- U.S. public companies with "low" leverage have an interest-bearing net debt-to-equity ratio of 0 percent or less, firms with "medium" leverage have a ratio between 1 and 62 percent, and "high" leverage firms have a ratio of 63 percent or more. Given these data, how would you classify the following firms in terms of their optimal debt-to-equity ratio (high, medium, or low)?
Successful Pharmaceutical Company
Electric Utility
Manufacturer of Consumer Durables
Commercial Bank
Start-Up Software Company