If a Firm Adheres Strictly to the Residual Dividend Policy,and

question 55

Multiple Choice

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

• A) the same dividend as it paid the prior year.
• 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. ,issuing debt).
• E) dividends only out of funds raised by selling off fixed assets.

---

Definitions:

Informal Groups

Naturally occurring groups within organizations or social settings, formed based on common interests, friendships, or identities, without formal structure.

Organizational Goals

The objectives or targets that an organization aims to achieve in a specific timeframe.

Friendship Group

A social group formed by individuals who share personal bonds and interests, often found within larger community or work settings.

Personal Security

entails the state of feeling safe and protected from harm on an individual level, encompassing physical, emotional, and financial security.