Which of the Following Is True Regarding the Information Effect

question 102

Multiple Choice

Which of the following is true regarding the information effect of dividend policies?

• A) Increases in dividends are seen as negative signals concerning the firm's performance.
• B) Increases in dividends are seen as negative signals concerning the firm's expected future cash flow levels.
• C) If a firm announces an increase in the next dividend, analysts see such announcements as a very positive signal.
• D) If a firm announces an increase in the next dividend, analysts see such announcements as a very negative signal.

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Definitions:

Anorexia

A lack or loss of appetite for food, which can be a symptom of various disorders or diseases.

General Malaise

A feeling of overall discomfort, uneasiness, or weakness, often marking the onset of a disease or infection.

Ritualistic

Pertaining to actions or practices performed in a prescribed order or manner, often with symbolic meaning.

Verbal Communication

The use of spoken words to convey messages, ideas, or thoughts.