A fundamental question in setting dividend policy is:

A) the tax considerations.
B) the amount of growth the firm considers optimal.
C) not violating any restrictive covenants.
D) determining what portion of earnings will be paid out.

Dividend Policy

A company's strategy or guideline determining the amount of profits paid out to shareholders as dividends versus being reinvested in the business.

Tax Considerations

Tax considerations involve understanding how taxes affect investment and financial decisions, impacting the overall cost or benefits of these decisions.

Restrictive Covenants

Clauses in contracts that limit certain actions of the parties involved, often used in employment contracts and loan agreements to protect business interests.