Read the following statements and mark the correct answer.

Assertion: The dividend in growth companies is smaller than that in the non growth companies.
Reasoning: Companies having good growth opportunities retain more money out of their earnings so as to finance the required investment.

Both Assertion (A) and reasoning (R) are correct and R is the correct explanation of A.

The correct answer is option 1- Both Assertion (A) and reasoning (R) are correct and R is the correct explanation of A.

Assertion (A): The dividend in growth companies is smaller than that in the non-growth companies. THIS IS TRUE.  Growth companies, which are characterized by high investment opportunities and rapid expansion, often pay out lower dividends because they prefer to reinvest earnings back into the business rather than distributing them to shareholders. Non-growth companies, on the other hand, may have fewer investment opportunities and thus might distribute a higher portion of their earnings as dividends.

Reasoning (R): Companies having good growth opportunities retain more money out of their earnings so as to finance the required investment. THIS IS TRUE. Reasoning explains why growth companies pay smaller dividends. Growth companies indeed retain more of their earnings to fund new investments and support their expansion, which leads to a lower dividend payout.

Thus, Both the assertion and the reasoning are correct, and the reasoning correctly explains the assertion.