If a Firm Adheres Strictly to the Residual Distribution Policy

question 58

Multiple Choice

If a firm adheres strictly to the residual distribution policy (with all distributions in the form of dividends) , a sale of new common stock by the company would suggest that

• A) The dividend payout ratio has remained constant.
• B) The dividend payout ratio is increasing.
• C) No dividends were paid for the year.
• D) The dividend payout ratio is decreasing.
• E) The dollar amount of investments has decreased.