The residual dividend theory suggests that dividends should be paid to shareholders first, and then, what is left can be reinvested by the firm.

Name: The residual dividend theory suggests that dividends should be paid to shareholders first, and then, what is left can be reinvested by the firm.
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The residual dividend theory suggests that a company should pay dividends only after all its investment needs are met; thus, dividends are paid from the residual or leftover earnings after financing projects.

The Residual Dividend Theory Suggests That Dividends Should Be Paid