Question

List three practical considerations that managers should take into account when setting a dividend policy?

List three practical considerations that managers should take into account when setting a dividend policy?

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Answer #1

1. The future cash flows of the firm have to be considered if the same will be sustainable. If the cash flows are not sustainable then it will be not a prudent decision to pay dividends regularly.

2. The current investment needs of the company to ensure that the company finances it needs from retained earnings than external resources.

3. The taxes and economic conditions have to be considered while setting the policy.

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