Payout policy may be defined as the trade-off between cash dividends on the one hand and paying out cash and issuing shares on the other.

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Payout policy refers to the decision of a company regarding how much of its earnings to distribute to shareholders in the form of dividends or share repurchases, and how much to retain for reinvestment in the business. This involves a trade-off between paying out cash dividends and retaining earnings to fund growth opportunities or pay off debt obligations.

Payout Policy May Be Defined as the Trade-Off Between Cash