B. This is the payout ratio for the past year. See the correct answer for a complete explanation.

C. This answer is incorrect. See the correct answer for a complete explanation.

D. Probably the best way to solve this problem is to make an example. Let us assume that last year the earnings were $100 and that $50 was paid out. If the earnings increased by 20%, the earnings are now $120. If the payout increased by 15%, the payout is now $57.50. The new ratio is $57.50 / $120, or 47.9%. Also, given that the payout increased by less than the earnings, we know that the payout ratio had to decrease, and this is the only choice in which the answer decreased.