A policy under which the ﬁrm pays dividends only after its capital investment needs are met, and while maintaining a constant debt/equity ratio, is called a __________________.

Question

Quizplus · Accepted Answer

The definition given in the question matches with the description of residual dividend approach, which allows a firm to first invest in its capital projects and then distribute the remaining profits as dividends. This approach ensures that the firm maintains a constant debt-to-equity ratio and avoids the need to raise external finances. The other options listed in the question are not relevant to the given description.

A Policy Under Which the ﬁRm Pays Dividends Only After