If a Firm Adheres Strictly to the Residual Dividend Policy

question 20

Multiple Choice

If a firm adheres strictly to the residual dividend policy, the issuance of new common stock would suggest that

• A) the dividend payout ratio has remained constant.
• B) the dividend payout ratio is increasing.
• C) no dividends will be paid during the year.
• D) the dividend payout ratio is decreasing.
• E) the dollar amount of capital investments had decreased.

---

Definitions:

Resistance

Opposition or pushback encountered when an organization attempts to implement changes, often stemming from employees' fear, misunderstanding, or distrust.

Connection Power

The influence one gains over others through the ability to establish and leverage personal and professional relationships.

Compliance

Adhering to laws, regulations, guidelines, and specifications relevant to business operations or practices.

Identification

The psychological process of associating oneself with certain groups, ideals, or characteristics.