The controversial practice of a company borrowing money simply to fund dividend payouts to itself is known as
A) a leveraged buyout.
B) retrenchment.
C) first mover advantage.
D) dividend recapitalization.
E) dividend divestiture.

Question

Quizplus · Accepted Answer

Dividend recapitalization is the term used for the practice of a company borrowing money specifically to pay out dividends to shareholders. This controversial practice can leave the company with greater debt and a higher risk profile, and it is often viewed as a short-term solution that sacrifices long-term financial stability.

The Controversial Practice of a Company Borrowing Money Simply to Fund