CBSE 2025, BS Set 1

Question

Read the following statements: Assertion (A) and Reason (R).

**Assertion (A):** The dividend in growth companies is smaller than that in the non-growth companies.

**Reason (R):** Companies having good growth opportunities retain more money out of their earnings so as to finance the required investment.

Choose the correct alternative from the options given below: A). Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). B). Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A). C). Assertion (A) is true, but Reason (R) is false. D). Assertion (A) is false, but Reason (R) is true.

Edvaya · Accepted Answer

The correct answer is Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).. **Both A and R are true and R correctly explains A.**

Growth companies reinvest a large portion of their profits to fund expansion and new investment opportunities, leaving less for dividend distribution. Hence dividends are smaller in growth companies — this is what Assertion A states. Reason R directly explains *why*: because they retain more earnings to finance investment. Both are true and R explains A.

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Business Studies > Business Finance > Financial Management

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