According to the Residual Theory of Dividends, If the Firm's

question 41

Multiple Choice

According to the residual theory of dividends, if the firm's equity need is less than the amount of retained earnings, the firm would

• A) borrow to pay the cash dividend.
• B) declare a dividend equal to the remaining balance.
• C) pay no cash dividends.
• D) not need to consider its dividend policy.

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Definitions:

Annual Interest

The amount of interest due over the course of a year on a loan or investment, calculated as a percentage of the principal.

Bank Account

A financial account maintained by a bank for a customer, allowing for the management, deposit, and withdrawal of funds.

Payment Stream

A series of periodic payments that may be constant or variable, over time, often associated with loans or investments.

Discount Rate

In finance, the interest rate used to determine the present value of future cash flows, or in central banking, the rate charged to commercial banks for loans from the central bank.