Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
What is “catering theory,” and how does it impact a firm’s dividend policy?
Expert Solution
Step 1: INTRODUCTION
Earnings of the firm can either be distributed as dividend to the shareholders or retained as earnings in the business. Firm has to decide how much portion of the dividend to be distributed and how much should be retained in the business. There are various dividend theories according to which a firm can take this decision.
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