Question

Firms in the death stage typically will cut their dividend in order to preserve retained earnings.

a.   True

b. False

Answer 1

a. True. Firms in the death stage typically will cut their dividend in order to preserve retained earnings.

Any firm in the death stage would not pay or rather would not pay any dividend, rather it would like to save its income earned as retained earning for revival. Retained eanings if available help a company to invest in the profitable projects as and when possible. Hence, if the comoany ets the oppotunity to invest in such projects, it will directly use its reatined earnings rather than getting back to the investors again for the funds which is time consuming process.