All of the Following Conclusions on the Importance of a Dividend

question 84

Multiple Choice

All of the following conclusions on the importance of a dividend policy are true EXCEPT

• A) as a firm's investment opportunities increase, the dividend payout ratio should decrease.
• B) the firm's expected earning power and the riskiness of these earnings are more important to the investor than the dividend policy.
• C) dividends may influence stock price by the investor's desire to minimize and/or defer taxes and from the role of dividends in minimizing agency costs.
• D) in order to avoid surprising investors, management should anticipate financing needs for the short-term, but not for the long term.

---

Definitions:

Common Sense

A pamphlet written by Thomas Paine in 1776 advocating for American independence from Britain, emphasizing clear, rational arguments accessible to the general populace.

Parliament

The supreme legislative body in a parliamentary system, often composed of two houses (bicameral), where elected representatives debate and pass laws.

Independence

The condition of a nation, country, or state which exercises self-government, and sovereignty, over its territory, free from external control.

Printing Paper Money

The process undertaken by a country's central bank or government to produce its national currency, typically to manage economic activity.