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CS Executive · Corporate Accounting and Financial Management · Introduction to Financial Management

The finance manager of Kaveri Textiles Ltd. is deciding how much of the year's earnings to pay out as dividend and how much to retain in the business. Under the three basic decision areas of financial management, this is mainly a:

This is a dividend decision. Deciding what share of earnings goes to shareholders as dividend and what share is retained is the payout question, which is one of the three main decision areas of financial management alongside investment and financing decisions.

  1. AInvestment decision
  2. BFinancing decision
  3. CDividend decisionCorrect
  4. DLiquidity decision

Explanation

The decision on dividing earnings between distribution to shareholders and retention is the dividend decision. Investment decisions concern asset acquisition and financing decisions concern the sources and mix of capital. Retention does affect internal financing, but the core question here is the payout, so dividend is the correct classification.

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