If a Firm Adheres Strictly to the Residual Dividend Policy

question 56

Multiple Choice

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

• A) the dividend payout ratio has remained constant
• B) the dividend payout ratio is increasing
• C) no dividends were paid during the year
• D) the dividend payout ratio is decreasing

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Definitions:

Free Market Economy

An economic system based on supply and demand with minimal government intervention.

Competition

A situation in which entities, individuals, or groups strive against each other to achieve a desired objective, often leading to innovation and improvement.

Cash-Only Transactions

Financial exchanges where payment is made using paper money or coins, without the involvement of digital or credit mechanisms.

Patents

Legal documents granting inventors exclusive rights to their inventions, preventing others from making, using, or selling the invention without permission.