Firms That Follow the Constant Payout Ratio Dividend Policy Have

question 25

Multiple Choice

Firms that follow the constant payout ratio dividend policy have:

• A)stable dividend payments, even when earnings fluctuate.
• B)fluctuating dividend payments, even when earnings are stable.
• C)higher costs of equity when earnings are stable than similar firms that have fluctuating earnings.
• D)lower costs of retained earnings when earnings are volatile than similar firms that have stable earnings.
• E)fluctuating dividend payments when earnings fluctuate.

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Definitions:

Price Inelastic

Characterizes a situation where the demand for a good or service does not significantly change with a change in its price.

Price Volatile

Refers to sudden and significant price changes within short periods, often seen in markets for commodities or securities.

Marketing Mix

The factors that a business can change in selling products to customers—product, place, price, and promotion.

Market Will Bear

Refers to the maximum price that consumers are willing to pay for a product or service in the market.