Avoiding new equity sales is consistent with both a residual and a compromise dividend policy.

Question

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Both residual and compromise dividend policies can lead to a situation where a company avoids issuing new equity. In a residual dividend policy, dividends are paid out from leftover earnings after all project financing needs are met, potentially reducing the need for new equity. In a compromise dividend policy, companies strive to balance dividend payments and financing needs, often aiming to avoid new equity issuance to maintain a stable dividend while supporting growth.

Avoiding New Equity Sales Is Consistent with Both a Residual