The residual dividend theory suggests that: a. Firms should pay dividends only if the net income is higher than firm capital needs b. Dividends should be paid if Net Income -Debt Ratio*Capital Budget is positive c. Dividend should be paid if Net Income - % Equity in Capital Structure*Capital Budget is greater than zero d. Dividends should be paid on the basis of a constant payout ratio e. Dividends should be paid if free cash flows to the firm are positive

The residual dividend theory suggests that: a. Firms should pay dividends only if the net income is higher than firm capital needs b. Dividends should be paid if Net Income -Debt RatioCapital Budget is positive c. Dividend should be paid if Net Income - % Equity in Capital StructureCapital Budget is greater than zero d. Dividends should be paid on the basis of a constant payout ratio e. Dividends should be paid if free cash flows to the firm are positive

Foundations of Business (MindTap Course List)

6th Edition

ISBN:9781337386920

Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor

Publisher:William M. Pride, Robert J. Hughes, Jack R. Kapoor

Chapter15: Using Management And Accounting Information

Section: Chapter Questions

Problem 6DQ

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	a.	Firms should pay dividends only if the net income is higher than firm capital needs
	b.	Dividends should be paid if Net Income -Debt Ratio*Capital Budget is positive
	c.	Dividend should be paid if Net Income - % Equity in Capital Structure*Capital Budget is greater than zero
	d.	Dividends should be paid on the basis of a constant payout ratio
	e.	Dividends should be paid if free cash flows to the firm are positive