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.
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.
Show Hint
Dividends come from profits—so no profit, no dividend. That’s why earnings directly determine dividend decisions.
Updated On: Jan 13, 2026
- Both Assertion (A) and Reason (R) are true and Reason (R) is 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.
Show Solution
Verified By Collegedunia
The Correct Option is A
Solution and Explanation
Dividend decisions are major financial decisions influenced by a company's earning capacity. Higher earnings generally enable higher dividends, while low or negative earnings restrict them.
Assertion (A) is true because earnings directly affect the company's ability to pay dividends. Reason (R) is also true because dividends are legally and practically distributed from profits — whether retained from the past or newly earned.
Also, Reason (R) logically explains Assertion (A): the amount of dividend that a firm can distribute is limited to the amount of profit it has earned (either current or accumulated). Hence, earnings are not just a determinant, they are a prerequisite.
Final Answer: (A) Both Assertion (A) and Reason (R) are true and Reason (R) is correct explanation of Assertion (A).
Assertion (A) is true because earnings directly affect the company's ability to pay dividends. Reason (R) is also true because dividends are legally and practically distributed from profits — whether retained from the past or newly earned.
Also, Reason (R) logically explains Assertion (A): the amount of dividend that a firm can distribute is limited to the amount of profit it has earned (either current or accumulated). Hence, earnings are not just a determinant, they are a prerequisite.
Final Answer: (A) Both Assertion (A) and Reason (R) are true and Reason (R) is correct explanation of Assertion (A).
Was this answer helpful?
0
0
Top CBSE CLASS XII Business Studies Questions
What is the Planning Process?
- ................ is one of the most important attitudes of an entrepreneur, which is defined as the ability to continue to do something, even when it is difficult.
(A) Decisiveness
(B) Interpersonal skills
(C) Perseverance
(D) Taking initiative - Mention any four most common environmental barriers which an entrepreneur may face while running his/her venture.
- ____is the process of searching for prospective employees and stimulating them to apply for jobs in the organization.
‘Vishesh Constructions’, a construction company, decided to strictly implement ‘No Helmet, No Entry’ and put the following sign at their construction sites :
Identify the type of plan indicated by the above sign :
View More Questions
Top CBSE CLASS XII Financial Management and Financial Market Questions
- ‘Increase in profit earned by equity shareholders due to the presence of fixed financial charges like interest’ is referred to as :
- ‘A public issue of equity may reduce the management holding in the company and make it vulnerable to takeover...’ The factor affecting choice of capital structure discussed in the above case is :
- __________ is the process of holding securities in an electronic form.
- Financial market allocates or directs funds available for investment into the most productive investment opportunity. In doing so, it performs the __________ function.
- "The stock exchange performs many vital functions in today's commerical world". Explain any four such functions.
View More Questions
Top CBSE CLASS XII Questions
- 2, b, c are in A.P. and the range of determinant $\begin{vmatrix}1&1&1\\ 2&b&c\\ 4&b^{2}&c^{2}\end{vmatrix}$ is [2, 16]. Then find range of c is
- A boy of mass 50 kg is standing at one end of a, boat of length 9 m and mass 400 kg. He runs to the other, end. The distance through which the centre of mass of the boat boy system moves is
- A capillary tube of radius r is dipped inside a large vessel of water. The mass of water raised above water level is M. If the radius of capillary is doubled, the mass of water inside capillary will be
- A circular disc is rotating about its own axis. An external opposing torque 0.02 Nm is applied on the disc by which it comes rest in 5 seconds. The initial angular momentum of disc is
- A circular disc is rotating about its own axis at uniform angular velocity \(\omega.\) The disc is subjected to uniform angular retardation by which its angular velocity is decreased to \(\frac {\omega}{2}\) during 120 rotations. The number of rotations further made by it before coming to rest is
View More Questions