While an Earnings Requirement Limiting the Amount of Dividends Paid

question 42

True/False

While an earnings requirement limiting the amount of dividends paid is sometimes imposed, the firm is not prohibited from paying more in dividends than its current earnings.

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Definitions:

Callable Bonds

Obligations that give the issuer the option to redeem them ahead of their final maturity, at a set price.

Bond Indenture

A legal document specifying the terms and conditions under which a bond has been issued, including the interest rate, maturity date, and covenants.

Fiscal Year

A one-year period used for financial reporting and budgeting that does not necessarily coincide with the calendar year, varying between organizations.

Times Interest Earned

A ratio measuring a company's ability to meet its interest payments based on its operating income, indicating financial health and creditworthiness.