A Potential Downfall of Using Dividends as the Plug Item

question 53

Multiple Choice

A potential downfall of using dividends as the plug item is that:

• A)It may give shareholders mixed signals
• B)Dividends are constant within a planning horizon
• C)The firm may have to borrow cash to pay dividends
• D)Shareholders may receive an excessive return

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Definitions:

Biological Transformation

refers to the process through which living organisms undergo changes in their physical or chemical structure, such as growth, reproduction, or decay, often used in the context of agriculture or environmental science.

AASB 141

An Australian Accounting Standards Board regulation concerning agriculture, guiding the accounting for agricultural activity and assets.

IAS 41

The International Accounting Standard on Agriculture, concerning the accounting for agricultural activity and the management of biological assets and agricultural produce.

Market Value

The current price at which an asset or service can be bought or sold in the market.