A firm will set its dividend policy high enough so that it can continually meet the distribution level of the cash dividend in spite of variances in cash inflow from operations and in cash outflows for maintenance and investing.

Question

Quizplus · Accepted Answer

A firm's dividend policy is based on a number of factors, including its financial needs and goals, and is not necessarily set high enough to continually meet the distribution level of the cash dividend regardless of variances in cash inflow and outflow. Instead, the firm may adjust its dividend policy based on changes in its financial situation and cash flow.

A Firm Will Set Its Dividend Policy High Enough So