If a Firm Adheres Strictly to the Residual Dividend Policy

question 16

Multiple Choice

If a firm adheres strictly to the residual dividend policy, then if its optimal capital budget requires the use of all earnings for a given year (along with new debt according to the optimal debt/total assets ratio) , then the firm should pay

• A) no dividends except out of past retained earnings.
• B) no dividends to common stockholders.
• C) dividends only out of funds raised by the sale of new common stock.
• D) dividends only out of funds raised by borrowing money (i.e., issue debt).
• E) dividends only out of funds raised by selling off fixed assets.

Understand how accounting errors in discount calculations impact financial statements.

Recognize the correct methods for posting transactions to the General Ledger and subsidiary ledgers.

Identify the role and workings of subsidiary ledgers and controlling accounts.

Comprehend how sales taxes affect recording sales transactions.

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Definitions:

Permissive Pattern

A parenting style characterized by low demands with high responsiveness.

Authoritarian Style

A parenting or leadership style characterized by strict rules, high expectations, and little open dialogue between authority figures and those they govern.

Carol Gilligan

An American feminist, ethicist, and psychologist best known for her work on gender differences in moral development.

Moral Orientations

The preferred ethical standpoint an individual adopts when making decisions involving moral considerations.