An Increase in Dividends Might Not Increase Price and May

question 84

Multiple Choice

An increase in dividends might not increase price and may actually decrease stock price if:

• A) the dividend increase cannot be sustained.
• B) the firm does not maintain an exact dividend payout ratio.
• C) the firm has too much retained earnings.
• D) markets are weak-form efficient.

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Definitions:

Steroids

A class of organic compounds with a characteristic molecular structure containing four rings of carbon atoms; found naturally in plants, animals, and fungi, and are used in medicine, often as hormones.

Micelle

A spherical aggregate of surfactant molecules dispersed in a liquid colloid, where the hydrophilic heads face outward and the hydrophobic tails are tucked inside.

Lecithin

A fatty substance found in plant and animal tissues, composed of phospholipids, and is used as an emulsifier in food and pharmaceutical products.

Diterpene

A type of terpene consisting of four isoprene units, making up 20 carbon atoms, often found in essential oils and used in medicines and perfumes.