The Information Content of a Dividend Increase Generally Signals That

question 28

Multiple Choice

The information content of a dividend increase generally signals that:

• A) the firm has a one-time surplus of cash.
• B) the firm has few, if any, net present value projects to pursue.
• C) management believes that the future earnings of the firm will be strong.
• D) the firm has more cash than it needs due to sales declines.
• E) future dividends will be lower.

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Definitions:

Producer Surplus

The difference between the actual amount that producers receive from selling a good and the minimum amount they would accept to produce that good.

Supply Curve

A graph that shows the relationship between the price of a good and the quantity of the good that producers are willing to sell.

Total Surplus

The sum of consumer surplus and producer surplus, representing the total benefit to society from the production and consumption of goods and services.

Transplant Organs

Organs removed from one body and placed in another's body for the purpose of replacing a missing or defective organ.