A valid reason for a ﬁrm to reduce or eliminate its cash dividends is if the ﬁrm can raise new capital
easily at a very low cost.

Question

Quizplus · Accepted Answer

Even if the firm can raise new capital easily and at a low cost, it does not necessarily mean it should reduce or eliminate its cash dividends. Dividends are often seen as a signal of a firm's financial strength and stability, and reducing or eliminating them may negatively impact the firm's reputation and stock price. Factors such as the firm's financial needs, investment opportunities, and shareholder preferences should also be considered when making dividend decisions.

A Valid Reason for a ﬁRm to Reduce or Eliminate