The problem with the regular dividend policy from a firm's perspective is that ________.
A) it regularly pays dividends which fluctuate with earnings
B) if the firm's earnings drop, the dividends may be low
C) even when earnings are low, the company must pay a fixed dividend
D) it increases the shareholders' uncertainty

Question

Quizplus · Accepted Answer

The regular dividend policy requires a fixed dividend payment to shareholders, which becomes a problem for a firm when its earnings drop or are low. In such situations, the company may struggle to find the funds to pay the dividends, which can negatively affect its financial stability and shareholder confidence. Therefore, the regular dividend policy may not be the best option for firms that want to maintain a consistent payout to shareholders, regardless of their earnings.

The Problem with the Regular Dividend Policy from a Firm's