Asked by Shaniek Wiltshier on May 06, 2024
Verified
Terms contained in bond indenture agreements tends to keep dividends low.
Bond Indenture Agreements
Legal documents specifying the rights and obligations of both the issuing company and the bondholders, including details about interest payments and the maturity date.
Dividends Low
A situation where a company chooses to distribute a relatively small portion of its earnings to shareholders as dividends.
Terms
Conditions and stipulations that govern the agreement or contract between parties, often detailing the obligations, rights, and responsibilities of each party.
- Acknowledge the significance of flotation costs in determining dividend decisions.
- Identify the limitations placed on dividend policies by bond indentures.
Verified Answer
JM
Johnathan MondragonMay 08, 2024
Final Answer :
True
Explanation :
Bond indenture agreements often include covenants that restrict the amount of dividends a company can pay out to its shareholders in order to ensure the company maintains enough cash reserves to meet its interest and principal repayment obligations.
Learning Objectives
- Acknowledge the significance of flotation costs in determining dividend decisions.
- Identify the limitations placed on dividend policies by bond indentures.