If a firm adheres strictly to the residual dividend policy, the issuance of new common stock would suggest that

Name: If a firm adheres strictly to the residual dividend policy, the issuance of new common stock would suggest that
Brand: Quizplus
Rating: 4.8 (50 reviews)

Question

Quizplus · Accepted Answer

Under a residual dividend policy, dividends are paid only after all acceptable investment opportunities are funded. If new common stock is issued, it suggests that the firm did not have enough retained earnings to fund its investments, implying that no dividends were paid.

If a Firm Adheres Strictly to the Residual Dividend Policy