The problem with the regular dividend policy from the firm's perspective is that
A) it bores the shareholders.
B) if the firm's earnings drop, so does the dividend payment.
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 the company to pay a fixed dividend, even when earnings are low. This can be a problem for the company as it may not have the financial resources to make these payments, which could lead to financial difficulties. In contrast, with a flexible dividend policy, the company can adjust the dividend payment based on its current earnings, which can help it manage its cash flow and avoid financial problems. Therefore, the best choice is C.

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