The residual dividend theory implies that internally generated funds (i.e.,retained earnings)should be used to fund all new investment projects before the company uses any additional debt.

Question

Quizplus · Accepted Answer

The residual dividend theory suggests that dividends should be paid out from the remaining earnings after all profitable investment opportunities have been funded, not that internally generated funds should be used to fund all new investments before taking on additional debt.

The Residual Dividend Theory Implies That Internally Generated Funds (I