The Information Content of a Dividend Increase Generally Signals That

question 59

Multiple Choice

The information content of a dividend increase generally signals that:

• A) the payer has a one-time surplus of cash.
• B) the payer has few, if any, net present value projects to pursue.
• C) management believes earnings growth will be strong going forward.
• D) the payer has more cash than it needs due to a decline in future orders.
• E) dividends thereafter will be lower.

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Definitions:

Consolidated Patents

Patents owned by a parent company and its subsidiaries that are combined for reporting purposes on consolidated financial statements.

Goodwill Impairment

This occurs when there is evidence that the value of goodwill has declined permanently beyond its recoverable amount, necessitating a write-down in its book value.

Amortization

The process of reducing the cost of a tangible or intangible asset through systematic, periodic deductions over its useful life.

Fair Value

An estimate of the price at which an asset or liability could be traded in an orderly transaction between market participants at the measurement date.