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:

Innovation Process

The systematic approach to developing and implementing new ideas, products, or processes, from initial conception through to successful market introduction.

New Washing Machine

Refers to a recently introduced model or unit of a household appliance designed for laundering clothes and textiles.

Initial Model

The first or preliminary version of a model that provides a basic framework for understanding or representing a concept or system.

Business Cycle

The natural rise and fall of economic growth that occurs over time, including periods of expansion, peak, contraction, and trough.