Asked by Camila Ramirez on Jun 06, 2024
Verified
A valid reason for managers not to pay no cash dividend is a situation where the firm is in financial distress and needs to conserve cash to meet its contractual obligations.
Financial Distress
A situation where a company cannot meet or has difficulty paying off its financial obligations to its creditors.
Cash Dividend
A distribution of profits by a corporation to its shareholders in the form of cash.
- Understand the motivations behind businesses altering their dividend distributions.
Verified Answer
TR
Tristan RaborgJun 09, 2024
Final Answer :
True
Explanation :
When a firm is in financial distress, conserving cash to meet its contractual obligations, such as debt repayments, is a valid reason for managers to decide against paying cash dividends. This approach helps ensure the firm's survival and long-term financial health.
Learning Objectives
- Understand the motivations behind businesses altering their dividend distributions.