Given a compromise dividend policy, ﬁrms prefer to maintain a target debt-equity ratio.

Question

Quizplus · Accepted Answer

This is because maintaining a target debt-equity ratio helps firms balance their financial structure and minimize financial risk. A compromise dividend policy may involve paying out a portion of profits as dividends while retaining some for investment or debt payment, but the target debt-equity ratio remains a key consideration.

Given a Compromise Dividend Policy, ﬁRms Prefer to Maintain a Target