Dividend policy of a firm is governed by:(i) Long Term Financing Decision:As we know that one of the financing options is ‘Equity’. Equity can either be raisedexternally through issue of new equity shares or can be generated internally throughretained earnings. For Equity, retained earnings are preferable because they do notinvolve any floatation costs (issue expenses).But whether to retain or distribute the profits, forms the basis of this decision.Further, payment of cash dividend reduces the amount of funds required to financeprofitable investment opportunities thereby restricting its financing options.In this backdrop, the decision is based on the following:1. Whether the organization has opportunities in hand to invest the profit,if retained?2. Whether the return on such investment (ROI) will be higher than theexpectations of shareholders i.e. Ke?

Dividend policies in practice vary across companies based on:a.Industry norms and competitive factorsb.Regulatory requirements and tax implicationsc.Cash flow availability and future investment opportunitiesd.All of the above

A dividend is that part or portion of the profits of a corporation set aside, declared and ordered by the directors to be paid to the stockholders on demand or at a fixed time.Group of answer choicesTrueFalse

When a company pays a dividend the: Group of answer choices Dividend Paid account will increase with a debit. Dividends Paid account will be increased with a credit. Retained Earnings account will be directly increased with a credit. Dividends Paid account will be decreased with a debit.

Factors determining dividend policy include:a.Profitability and liquidity of the companyb.Stock price and market conditionsc.Taxation laws and regulatory requirementsd.All of the above

The board of directors of a stock corporation may declare dividends out of the unrestricted retained earnings which shall be payable in cash, property, or in stock to all stockholders on the basis of outstanding stock held by them.Group of answer choicesTrueFalse