Question

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. 

Options

• 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. 

Answer 1

Both Assertion (A) and Reason (R) are true and Reason (R) is correct explanation of Assertion (A).

Explanation:

Companies declare dividends based on their earnings, whether they are current or previous.