Question

Which of the following examples best represents a passive dividend policy? a. The firm sets a...

Which of the following examples best represents a passive dividend policy?

a.

The firm sets a policy such that the proportion of dividends paid from net income remains constant.
b.

The firm pays dividends with what remains of net income after taking acceptable investment projects.
c.

The firm sets a policy such that the quantity (dollar amount per share) of dividends paid from net income remains constant.
d.

All of the above are examples of various types of passive dividend policies.
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Answer #1

Answer B) The firm pays dividends with what remains of net income after taking acceptable investment projects.

Passive Dividend Policy- In this policy dividend is paid after takingout money out of profits for future Investment projects. Since there is uncertainity about the future investment and amount of profits, the amount of dividend became inconnstant.

In Option A) & C), dividends are constant so, option D) also cant be applicable. Therefore, Option B) is only correct answer.

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