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Pachacha [2.7K]
3 years ago
13

A company decides not to pay dividends to stockholders, but the company is requested to pay interest to debt holders. What does

this mean about the performance of the company?
Business
1 answer:
schepotkina [342]3 years ago
6 0

Answer: Poor Performance

Explanation:

Options are not available but the foremost reason why a company would decline to pay dividends but still be requested to pay interest to debt holders is that they performed poorly.

Dividends are based on how much net income the company got for the period and so if a company performs poorly, they should not pay out dividends as it will put them in financial difficulty.

Interest payments however have to be paid regardless of if the company made a profit or not. So even if the company performed poorly, they would still be requested to pay interest to debt holders.

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