Question

Higher dividend per share is associated with:

• A. high earnings, high cash flows, stable earnings and lower growth opportunities
• B. high earnings, low cash flows, stable earnings and lower growth opportunities
• C. high earnings, high cash flows, stable earnings and high growth opportunities
• D. high earning, high cash flows, unstable earnings and higher growth opportunities

Answer 1

The correct option is A

high earnings, high cash flows, stable earnings and lower growth opportunities

The dividend decision involves how much of the profit earned by company is to be distributed to the shareholders and how much of it should be retained in the business for meeting investment requirement. High earning, high cash flow, stable earning and low growth opportunities etc. affects the rate of dividend.