The problem with the regular dividend policy from the firm's perspective is that
A) it increases the shareholders' uncertainty.
B) if the firm's earnings drop, so does the dividend payment.
C) even when earnings are low, the company must pay a fixed dividend.
D) it bores the shareholders.

Question

Quizplus · Accepted Answer

With the regular dividend policy, even when the company's earnings are low, it must pay a fixed dividend. This can put strain on the company's financial position and potentially lead to cash flow issues. Furthermore, shareholders may come to expect a regular dividend payment and become disappointed or skeptical if the company deviates from this policy. Therefore, it may be better for the company to adopt a flexible dividend policy that allows for adjustments based on the company's earnings and financial performance.

The Problem with the Regular Dividend Policy from the Firm's