A firm that generates more cash than planned must distribute the excess cash as dividends.

Question

Quizplus · Accepted Answer

A firm is not required to distribute excess cash as dividends. It can choose to reinvest the cash, pay down debts, or hold onto the cash for future needs. Dividend distribution is a decision made by the firm's board of directors based on various factors such as financial performance, growth opportunities, and shareholder preferences.

A Firm That Generates More Cash Than Planned Must Distribute