Answer (D) is correct . The payout ratio is the percentage of income available to common shareholders that was paid out in the form of dividends during a period. The payout ratio is more nearly the result, rather than the cause, of a firm’s beta value. The beta value is based on the volatility of a company’s earnings. Volatility is influenced by both financial and operating leverage and the characteristics of the industry in which the firm operates.
Answer (A) is incorrect because The debt-to-equity ratio influences volatility of earnings and the beta value.
Answer (B) is incorrect because Industry characteristics determine how a firm’s stock price relates to the value of the market as a whole.
Answer (C) is incorrect because Operating leverage measures the level of fixed costs, and thus the degree of risk, taken on by the firm in its ongoing daily operations; risk has a direct impact on a firm’s profitability with respect to the overall market.
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