BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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only distribution of dividend to shareholders
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how much to be retained in business
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how much profit earned is distributed to shareholders and how much to be retained in the business
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none of the above
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Detailed explanation-1: -The dividend decision is concerned with the quantum of profits to be distributed among shareholders. A decision has to be taken whether all the profits are to be distributed, to retain all the profits in business or to keep a part of profits in the business and distribute others among shareholders.
Detailed explanation-2: -It is the decision about how much of earnings to pay out as dividends versus retaining and reinvesting earnings in the firm. Dividend policy must be evaluated in light of the objective of the firm namely, to choose a policy that will maximize the value of the firm to its shareholders.
Detailed explanation-3: -Dividend decision: Dividend decision is an important decision, which a financial manager has to take. It refers to decisions regarding that part of profits of a company which is distributed among its shareholders.
Detailed explanation-4: -Retained earnings (RE) are the amount of net income left over for the business after it has paid out dividends to its shareholders. The decision to retain the earnings or distribute them among shareholders is usually left to company management.
Detailed explanation-5: -The company stock should at least have a dividend payout ratio of 50%. Overall dividend yield should be between 3% and 6%. The company should have a fair track record when it comes to offering dividends and paying off debts.