Asked by Mariam Jaser on Apr 26, 2024
Verified
Avoiding dividend cuts is consistent with both a residual and a compromise dividend policy.
Dividend Cuts
Dividend cuts occur when a company reduces the size of the dividend payments to its shareholders, often as a response to financial difficulties or the need to conserve cash.
Compromise Policy
A strategy of finding a middle ground between differing views or objectives in a negotiation or decision-making process.
- Comprehend the determinants that affect decisions regarding dividend policy.
- Comprehend the idea and consequences of a compromise dividend policy.
Verified Answer
NB
Norma BejaranoApr 27, 2024
Final Answer :
False
Explanation :
A residual dividend policy focuses on investing in positive NPV projects first and paying out any leftover earnings as dividends, which could lead to fluctuating dividends. A compromise dividend policy aims to balance the goals of a residual policy with the desire to provide stable dividends, but avoiding dividend cuts is not a primary concern of a residual policy.
Learning Objectives
- Comprehend the determinants that affect decisions regarding dividend policy.
- Comprehend the idea and consequences of a compromise dividend policy.
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