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:

Earnings Per Share

A financial metric that measures the portion of a company's profit allocated to each outstanding share of common stock.

Price Earnings Ratios

A valuation metric for stocks, calculated by dividing the current market price of a stock by its earnings per share (EPS).

Growth Models

Economic theories that explain how economic growth occurs in the long-term by focusing on factors like savings, investment, and technological innovation.

Technical Analyst

A professional who evaluates securities by analyzing statistics generated by market activity, such as past prices and volume.