The _____________ Policy States That Dividends Will Vary Based Upon

question 91

Multiple Choice

The _____________ policy states that dividends will vary based upon how much excess funds the firm has from year-to-year, whereas under a ________________ policy the firm pays a constant percentage of earnings as dividends, so as earnings rise and fall so does the dollar amount of dividends.

• A) constant payout ratio, residual dividend
• B) residual dividend, constant payout ratio
• C) constant dividend, variable payout ratio
• D) variable payout ratio, constant dividend

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Definitions:

Cost-volume-profit Analysis

An accounting method used to determine how changes in costs and volume affect a company's operating income and net income.

Sales Mix

The proportion of different products or services that a business sells, significant because it can affect the company's overall profitability depending on the contribution margin of each item.

Unit Contribution Margin

The difference between the selling price per unit and the variable cost per unit. This metric indicates how much each unit sold contributes to fixed costs and profit.

Cost-Volume-Profit Analysis

A management accounting method used to understand the relationship between costs, sales volume, and profit at various levels of production.