A firm with high profitability will always have the cash flow necessary to pay high dividends.

Name: A firm with high profitability will always have the cash flow necessary to pay high dividends.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

High profitability doesn't necessarily mean high cash flow. A firm may have high profitability due to non-cash items like depreciation and amortization, while still having low cash flow. Therefore, a high profitability firm may not always have enough cash flow to pay high dividends.

A Firm with High Profitability Will Always Have the Cash