Analysis of dividend policy begins with the basic assumption that shareholder wealth maximization is the primary goal,and therefore dividends should be of primary concern even if their payment results in capital rationing.

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Dividend policy is important, but it's not the sole focus for shareholder wealth maximization. Companies also need to invest in profitable projects to grow, and sometimes retaining earnings (instead of paying them out as dividends) is necessary to finance these investments without resorting to external financing, which could lead to capital rationing.

Analysis of Dividend Policy Begins with the Basic Assumption That