The correct answer is: A. Relevant Decision
Residuals Theory is a theory of dividend policy that argues that dividends should be paid out of residual earnings, which are earnings that remain after all profitable investment opportunities have been funded. This means that dividends are a relevant decision, as they should be based on the company’s financial situation and investment opportunities.
Option B, Active Decision, is incorrect because dividends are not an active decision in the sense that they are not something that a company can control. The amount of dividends that a company pays is determined by its earnings, and there is no guarantee that a company will be able to pay dividends in any given year.
Option C, Passive Decision, is incorrect because dividends are not a passive decision in the sense that they do not have no impact on a company’s value. Dividends can affect a company’s value by signaling to investors the company’s financial health and investment opportunities.
Option D, Irrelevant Decision, is incorrect because dividends are an important decision that can affect a company’s value. Dividends can be used to attract and retain investors, and they can also be used to return capital to shareholders.