Dividends Are Likely to Shift Up and Down as Earnings

question 24

True/False

Dividends are likely to shift up and down as earnings fluctuate so that managers can maintain a stable payout ratio.

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Definitions:

Liability

Anything owed to creditors—the claims of a company’s creditors.

Creditors

Individuals or institutions to whom money is owed by a debtor or borrower.

Business

Organizational entities that are involved in the trade of goods, services, or both to consumers, with the primary purpose of earning profits.

Owners' Equity

The residual interest in the assets of an entity after deducting liabilities, essentially the net worth belonging to the owners.