Under a residual dividend policy, a company normally pays dividends from:
Correct answer: B. Earnings remaining after financing acceptable investments
- A. Borrowed funds raised for expansion
- B. Earnings remaining after financing acceptable investments
- C. The gross revenue earned during the year
- D. The value of its non-current assets
Explanation
A residual dividend policy gives priority to financing all acceptable investment opportunities from available earnings. Any earnings left after those investments may then be distributed as dividends.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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