Suppose a Firm Adheres Strictly to the Residual Dividend Policy

question 25

Multiple Choice

Suppose a firm adheres strictly to the residual dividend policy and 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) .What should the firm 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 selling off fixed assets

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Definitions:

Temporary

Something that is not permanent and is intended or expected to last for a limited time.

Quality Failures

Occurrences when a product or service does not meet the established standards of quality.

Flowcharts

Graphic representations using symbols interconnected with lines to describe the steps in a process, decision-making pathways, or systems.

Quality Plan

A document detailing the specific quality practices, objectives, criteria, and the roles and responsibilities required to ensure the successful execution of a project or business process.