Question

The dividend policy followed by most companies is the

		residual policy
		constant payout ratio
		small regular dividend plus extras
		stable dollar dividend

Answer 1

Stable dollar dividend

True.Under a stable dividend policy investors receive a dividend regardless of the changes in earnings.It is the dividend policy followed by most companies.

Residual policy .

False.The dividend are paid from what remains after capital expenditure payments.It is not the most common dividend policy used,since it subjects investors to earnings volatility.

Constant payout ratio

False.The investors will be affected by the volatility of earnings of the company,as the dividends paid are a fixed percentage of the earnings.

small regular dividend plus extras

False.Under this policy the firm pays a small regular dividend plus a year end extra dividend during the prosperous years.