Financial Markets React When a Firm Pays or Chooses Not

question 108

Multiple Choice

Financial markets react when a firm pays or chooses not to pay a dividend. A dividend announcement is a way for management to send a message to shareholders.   This is known as the __________________. ​

• A)Clientele Effect​
• B)Residual Dividend Theory​
• C)Signaling Effect​
• D)Expectations Theory​

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Definitions:

Refinanced

The action of replacing an existing debt with a new one, often with more favorable terms or a lower interest rate.

Total Debt Service Ratio

A debt measure that financial institutions use to evaluate a borrower's ability to manage monthly payments and repay debts.

Gross Monthly Income

The total personal income earned per month before any deductions like taxes or social security contributions.

Compounded Semi-annually

Interest calculation method where interest is computed on the principal and also on the interest from previous six-month periods, applied twice a year.