Explore BrainMass

Explore BrainMass

    Residual dividend policy

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    If a firm adheres strictly to the residual dividend policy, a sale of new common stock by the firm would suggest that

    a. the dividend payout ratio has remained constant.

    b. the dividend payout ratio is increasing.

    c. no dividends were paid for the year.

    d. the dividend payout ratio is decreasing.

    e. the dollar amount of dividends has decreased.

    Discuss fully the reasons for your choice, then discuss briefly why the other choices are not correct.

    © BrainMass Inc. brainmass.com December 24, 2021, 4:49 pm ad1c9bdddf

    Solution Preview

    The correct answer is
    c. no dividends were paid for the year.

    Under the residual dividend policy the process is calculate the retained earnings that is required for capital budget purposes (investments) and what is leftover (retained earnings ...

    Solution Summary

    Answers a multiple choice question on residual dividend policy