If a Firm's Dividend Payout Ratio Is Determined After Achieving

question 84

Multiple Choice

If a firm's dividend payout ratio is determined after achieving a specific capital structure,then:

• A) dividends are an input to the financial plan.
• B) the capital budget should be revised.
• C) dividends are being used as a plug item.
• D) dividend forecasts become crucial to planning.

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Definitions:

Total Surplus

The total net benefit to society from the production and consumption of a good, equal to the sum of consumer surplus and producer surplus.

Consumer Surplus

The deviation between the full cost that consumers are willing and are financially suitable to pay for a product or service, and the cost they ultimately pay.

Individual Consumer Surplus

The net gain to an individual buyer from the purchase of a good; equal to the difference between the buyer’s willingness to pay and the price paid.

Selling Haircuts

The commercial activity of providing hair cutting and styling services to customers for a fee.