A constant payout policy for dividends involves:
A)a constant total amount of dividends paid each year.
B)a constant ratio of dividends to profit and a constant amount of dividends paid from year to year.
C)consideration given to profitable investment proposals.
D)a constant ratio of dividends to profit but not a constant amount of dividends paid from year to year.

Question

Quizplus · Accepted Answer

A constant payout policy for dividends involves maintaining a constant ratio of dividends to profit, but not necessarily a constant amount of dividends paid from year to year. This allows the company to adjust the actual dividend payout to reflect changes in profit levels, while still maintaining a relatively consistent dividend policy. Choice A involves a fixed dollar amount, which may not be sustainable if profit changes significantly. Choice B involves a fixed ratio and fixed dollar amount, which is not flexible enough to accommodate changes in profit levels. Choice C is not part of a constant payout policy for dividends, which focuses solely on dividend distribution.

A Constant Payout Policy for Dividends Involves