If a Firm Adheres Strictly to the Residual Dividend Policy

question 16

Multiple Choice

If a firm adheres strictly to the residual dividend policy, then if 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) , then the firm should 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 borrowing money (i.e., issue debt).
• E) dividends only out of funds raised by selling off fixed assets.

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Definitions:

Semi-Fowler's Position

A position where a person lies on their back with the head and torso raised between 15 to 45 degrees, often used in medical contexts to aid breathing or digestion.

Abdominal Muscles

A group of muscles in the abdomen area, including the rectus abdominis, obliques, and transverse abdominis, important for posture and core strength.

Knees Bent

A position of the knee joints where they are not fully extended or straight, often used to refer to exercises or physical state.

Catheterization

The medical procedure of inserting a catheter into a body cavity, duct, or vessel to allow for the drainage of fluids or the delivery of medications.