What Does the Lintner Empirical Model Suggest

question 19

Multiple Choice

What does the Lintner empirical model suggest?

• A)Firms rapidly adjust their dividends to changing economic conditions.
• B)Firms pay out a constant proportion of their earnings as dividends.
• C)Dividends are very sticky (i.e., they do not change frequently).
• D)Firms pay out a constant proportion of their revenue as dividends.

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Definitions:

Liquidation

The process of closing a business and distributing its assets to claimants.

Profit and Loss Ratio

Measures the relationship between the profits and losses of a business, indicating financial performance.

Safe Cash Payments

Methods of cash transactions that minimize the risk of theft, loss, or accounting errors.

Noncash Assets

Assets that are not in the form of cash or cannot be easily converted into cash, such as property, plant, and equipment.