An Increase in Share Price Following an Increase in Dividends

question 62

Multiple Choice

An increase in share price following an increase in dividends is logical if the:

• A)firm borrows to obtain cash for the dividend.
• B)increased dividend signals higher future earnings.
• C)financial markets are efficient.
• D)clientele effect is not important.

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Definitions:

FIFO Inventory

An inventory valuation method that assumes the first items placed in inventory are the first sold, prioritizing older stock for cost of goods sold.

Net Realizable Value

The estimated selling price of goods minus the estimated costs of completion and the costs necessary to make the sale.

FIFO Periodic

An inventory valuation method where the oldest inventory items are recorded as sold first, under a periodic system that updates inventory balances at the end of an accounting period.

Beginning Inventory

The value of a company's inventory at the start of an accounting period, carried over from the end of the prior period.