Which of the Following Best Explains Why We Can Calculate

question 66

Multiple Choice

Which of the following best explains why we can calculate stock prices from either expected earnings or expected dividends?

• A)Because a firm must eventually distribute all its earnings to shareholders, in the long run, earnings determine how much dividends can be paid.
• B)Because a firm must eventually distribute all its earnings to shareholders, in the short run, earnings determine how much dividends can be paid.
• C)Because a firm must eventually distribute all its earnings to shareholders, if a firm builds up excess earnings, the difference between dividends and earnings goes to the firm's board of directors.
• D)Expected earnings never determine the stock price.

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Definitions:

Business Suits

Formal attire typically worn in professional settings, consisting of a jacket and trousers or a skirt made from matching fabric.

Lawyer

A professional who is qualified to offer advice about the law or represent someone in legal matters.

Pulmonary Consolidation

An acute lung pathology characterized by the filling of airspaces with liquid instead of air, often seen in pneumonia.

Bronchophony

An abnormal increase in the clarity of transmitted voice sounds heard when auscultating the lungs, indicative of lung pathology.