CS Executive · Corporate Accounting and Financial Management · Dividend Decisions
Which of the following statements best describes the dividend decision of a company within financial management?
The dividend decision is the choice of how much of a company's earnings to pay out to shareholders and how much to retain for reinvestment. Financing mix, working capital levels and project selection belong to other financial management decisions, not the dividend decision.
- ADeciding what share of earnings to distribute to shareholders and what share to retain for reinvestmentCorrect
- BDeciding the mix of debt and equity used to finance long-term assets
- CDeciding the level of cash and inventory to be held for daily operations
- DDeciding which of several projects should be accepted using NPV
Explanation
The dividend decision concerns the split of net earnings between payout to shareholders and retention for reinvestment. The debt-equity mix is the financing decision, working capital levels are a short-term asset decision, and project selection is the investment decision.
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