An Increase in Share Price Following an Increase in Dividends

question 62

Multiple Choice

An increase in share price following an increase in dividends is logical if the:

• A)firm borrows to obtain cash for the dividend.
• B)increased dividend signals higher future earnings.
• C)financial markets are efficient.
• D)clientele effect is not important.

---

Definitions:

Production Process

The series of steps and operations involved in the manufacturing of a product or the delivery of a service.

Price Inelastic

Describes a situation in which the demand for a good or service changes little with a change in price.

Extraordinarily Large

A term used to describe a magnitude or amount that significantly exceeds what is common or expected.

Crop

A plant or plant product that is grown and harvested extensively for profit or subsistence.