If a firm pays out all of its earnings as dividends and its stockholders then elect to have all of their dividends reinvested, the company should reconsider its dividend policy and possibly move to a lower dividend payout ratio. True False

Question

Business

Reece Costa

25 February, 01:57

If a firm pays out all of its earnings as dividends and its stockholders then elect to have all of their dividends reinvested, the company should reconsider its dividend policy and possibly move to a lower dividend payout ratio. True False

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Answers (1)

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Kadyn Diaz · Answer 1

The Statement is "True"

Explanation:

In an organization profit decision taken by directorate, thus if financial specialists decide not to en-cash the dividend and reinvest it, the executives need to re-evaluate their choice.

In the event that the profit sum is diminished, it will prompts lower profit payout proportion, as profit payout proportion = Dividend appropriated/overall gain.