Asked by Chasity Kleinsorge on May 06, 2024
Verified
A valid reason for managers not to pay no cash dividend is a situation where the firm faces insignificant flotation costs.
Cash Dividend
A distribution of a company's earnings to shareholders in the form of cash, indicating the company's underlying profitability and cash flow health.
Flotation Costs
Costs that a company faces when it issues new securities, consisting of fees for underwriting, legal services, and registration.
- Comprehend the rationale for enterprises to revise their dividend plans.
Verified Answer
SK
Sophie KitwaMay 11, 2024
Final Answer :
False
Explanation :
Flotation costs are associated with raising new capital through issuing new securities, and not directly related to the decision of paying cash dividends. Managers might decide not to pay dividends due to other reasons such as reinvestment opportunities, liquidity concerns, or maintaining a stable dividend policy, but not because of insignificant flotation costs.
Learning Objectives
- Comprehend the rationale for enterprises to revise their dividend plans.