If a Firm Adheres Strictly to the Residual Dividend Policy

question 7

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:

Long-Term Care Facility

A healthcare facility designed to provide various services for individuals who are unable to independently care for themselves over an extended period.

Narrative

A spoken or written account of connected events; a story that may be factual or fictional, used for entertainment, education, or recording history.

Medical Record

A comprehensive document containing a patient's personal health history, including diagnoses, treatments, tests, and outcomes.

Occurrence Reports

Documentation of any event not consistent with the routine operation of a healthcare facility or the standard of care, used for quality improvement purposes.