Payout policy is a trade-off between ___________ and ___________.
A)retained earnings; borrowing
B)capital budgeting; capital structure
C)cash dividend; issuing stock
D)declaring stock splits; stock dividends

Question

Quizplus · Accepted Answer

Payout policy is the decision taken by a company regarding the amount and frequency of distribution of profits as dividends to shareholders. The trade-off in payout policy is between retaining earnings (which can be used for investment and growth opportunities) and distributing it to shareholders in the form of cash dividend or issuing stock. Therefore, the best choice is option C - cash dividend and issuing stock - as it represents the two primary alternatives of payout policy. Option A is incorrect because borrowing is not a component of payout policy. Option B is incorrect because capital budgeting and capital structure are not related to payout policy. Option D is incorrect because declaring stock splits and stock dividends are components of payout policy, but do not represent the trade-off between retained earnings and shareholder distribution.

Payout Policy Is a Trade-Off Between ___________ and ___________

Payout Policy Is a Trade-Off Between _ and _