Which One of the Following Statements Is Correct Concerning the External

Multiple Choice

Which one of the following statements is correct concerning the external financing need (EFN) and the dividend payout ratio? Assume EFN is a positive number.

A) The dividend payout ratio has no effect on the EFN.
B) An increase in the dividend payout ratio will decrease the EFN.
C) An increase in the dividend payout ratio will increase the EFN.
D) The effect on EFN caused by an increase in the dividend payout ratio cannot be predicted.
E) An increase in EFN causes the dividend payout ratio to decrease.