In the Real World, Which of the Following Is True

question 36

Multiple Choice

In the real world, which of the following is true regarding dividends?

• A) They are usually more stable than earnings.
• B) They fluctuate more widely than earnings.
• C) They tend to be a lower percentage of earnings for mature firms.
• D) They are usually changed every year to reflect earnings changes, and these changes are randomly higher or lower, depending on whether earnings increased or decreased.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity and operational efficiency.

Straight-Line Depreciation

A way of allocating the financial burden of a material asset over its effective lifespan in identical yearly portions.

Discount Rate

The interest rate used to discount future cash flows to present value to account for risk and time value of money.

Working Capital

The gap between a firm's current assets and its current liabilities, showcasing its short-term financial stability.