Question
4. In the big picture of corporate finance, the dividend principle states that firms should return as much cash as they can to their owners.
4. In the big picture of corporate finance, the dividend principle states that firms should return as much cash as they can to their owners. If firms followed this principle, which of the following would you expect to observe?
a. Firms will pay out all of their earnings as dividends/stock buybacks
b. Firms will not pay out any of their earnings to stockholders
c. Firms that have high earnings and low growth potential will return more cash to stockholders.
d. Firms that have high earnings and high growth potential will return more cash to stockholders.
e. None of the above
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