A valid reason for a ﬁrm to reduce or eliminate its cash dividends is if the ﬁrm has just received a
patent on a new product for which there is strong market demand and it needs the funds to bring
the product to the marketplace.

Question

Quizplus · Accepted Answer

This is a valid reason for a firm to reduce or eliminate its cash dividends because it may need the funds to invest in the development and marketing of a new product that has the potential to generate future profits. This decision is made with the goal of maximizing shareholder value in the long run.

A Valid Reason for a ﬁRm to Reduce or Eliminate