How Are Investors Most Apt to Interpret a Reduction in a Firm's

question 89

Multiple Choice

How are investors most apt to interpret a reduction in a firm's regular dividend payment?

• A) Earnings are expected to decline.
• B) New investments are expected to increase.
• C) Stock repurchases are expected to increase.
• D) Share price is expected to increase.

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Definitions:

Voting Power

The right or authority to vote, often related to the number of votes someone controls in the decision-making process of an organization.

Dividends

Payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.

Strike Suit

In corporation law, a derivative suit motivated primarily by an intent to gain an out-of-court settlement for the suing shareholder personally or to earn large attorney’s fees for lawyers, rather than to obtain a recovery for the corporation.

Derivative Action

A lawsuit brought by a company shareholder on behalf of the corporation against a third party, often insider directors or managers, alleging harm to the company.