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

Question

Quizplus · Accepted Answer

Dividend policy refers to the decision made by the management regarding the amount of profit to be distributed among shareholders and the amount to be retained for reinvestment in the company. The management has to balance between retaining earnings for future growth opportunities and paying dividends to shareholders to maintain their interest in the company. Therefore, dividend policy involves a trade-off between retaining earnings and cash payout.

Dividend Policy May Be Defined as the Trade-Off Between Retaining