The residual theory of dividends implies that if a firm's available retained earnings are in excess of its financing needs, it should distribute the earnings by paying dividends to stockholders.

Question

Quizplus · Accepted Answer

According to the residual theory of dividends, if a firm has excess earnings after meeting its financing needs, then it should distribute those earnings to its shareholders in the form of dividends. Therefore, the statement is true.

The Residual Theory of Dividends Implies That If a Firm's