A Potential Downfall of Using Dividends as the Plug Item

question 36

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:

Superficial Aspect

An element or characteristic of something that is apparent or visible on the surface, but does not provide depth into the true nature or essence.

Coherent Set

A collection of elements or entities that are logically consistent, connected, or unified.

Shared Values

Fundamental beliefs and principles that are held in common by members of an organization or community, contributing to its culture.

National Cultures

The set of norms, behaviors, beliefs, and customs that distinguish one country or population from another.