The dividend policy that strikes a balance between current dividends and the firm's future growth is called the ______ policy.

Question

Quizplus · Accepted Answer

The optimal dividend policy aims to balance the current needs of the shareholders for income with the firm's future growth prospects. This policy takes into account the firm's investment opportunities and financial needs to determine the optimal level of dividends. Thus, option A is the correct answer. Option B refers to the theory that suggests that the value of the firm is not affected by its dividend policy. Option C is not a recognized term in finance; option D refers to a situation where the amount or timing of dividends provides information about a firm's future prospects, and option E does not accurately describe the balancing act required of an optimal dividend policy.

The Dividend Policy That Strikes a Balance Between Current Dividends