In regards to dividend policy, unless a firm's investment policy and borrowing remain constant:

Question

Quizplus · Accepted Answer

Dividend policy is the decision a company makes on whether to distribute profits to shareholders in the form of dividends or to reinvest the profits back into the company. However, unless the company's investment policy and borrowing remain constant, its overall cash flows will change. If the company increases its investment policy or increases its borrowing, it may not have enough cash flow to continue paying out dividends at the same rate. On the other hand, if the company decreases its investment policy or decreases its borrowing, it may have excess cash flow and could potentially increase dividends. Therefore, unless the firm's investment policy and borrowing remain constant, dividend policy will be impacted and overall cash flows will change.

In Regards to Dividend Policy, Unless a Firm's Investment Policy