The chief drawback to residual dividend policy

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Reference no: EM131911131

It is sometimes suggested that firms should follow a residual dividend policy. With such a policy, the main idea is that a firm should focus on meeting its investment needs to maintaining its desired debt-equity ratio. Having done so, a firm pays out any leftover, or residual, income as dividends. What do you think would be the chief drawback to a residual dividend policy?

Reference no: EM131911131

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