Why Are Dividend Changes Rather Than Their Absolute Level Perceived

question 84

Multiple Choice

Why are dividend changes rather than their absolute level perceived to be more important to managers and shareholders?

• A)managers only change dividends under threatening conditions
• B)dividend changes are thought to signal future expectations
• C)MM states that the absolute level of dividends is irrelevant
• D)changes determine whether borrowing must occur

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Definitions:

Diluted Earnings Per Share

A metric that calculates a company’s earnings per share considering all potentially convertible securities.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock and usually receives dividends before common shareholders.

Convertible

Refers to a security, usually a bond or a preferred stock, that can be converted into a specified number of shares of common stock.

Common Stock

A type of security that signifies ownership in a corporation, entitling the shareholder to a share of the corporation's profits and assets.