Question:
Read the following statements Assertion (A) and Reason (R). Choose the correct option from the given options. Assertion (A): Amount of Earnings is a major determinant of the decision about dividend. Reason (R): Dividends are paid out of current and past earnings.
Read the following statements Assertion (A) and Reason (R). Choose the correct option from the given options. Assertion (A): Amount of Earnings is a major determinant of the decision about dividend. Reason (R): Dividends are paid out of current and past earnings.
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Earnings play a crucial role in determining dividend policies, balancing shareholder returns and reinvestment needs.
Updated On: Feb 21, 2025
- Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
- Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A).
- Assertion (A) is true but Reason (R) is false.
- Assertion (A) is false but Reason (R) is true.
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The Correct Option is A
Solution and Explanation
Earnings are the primary source for paying dividends, as dividends are distributed from current or retained earnings. The amount of earnings available determines whether a company can pay dividends while retaining enough for future investments.
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