An Increase in Dividends Might Not Increase Price and May

question 84

Multiple Choice

An increase in dividends might not increase price and may actually decrease stock price if:

• A) the dividend increase cannot be sustained.
• B) the firm does not maintain an exact dividend payout ratio.
• C) the firm has too much retained earnings.
• D) markets are weak-form efficient.

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Definitions:

Limited Partnerships

A form of partnership consisting of one or more general partners, who manage the business and assume legal debts and obligations, and one or more limited partners, who are liable only to the extent of their investments.

Corporate Income Taxes

Taxes imposed on the net income or profit of corporations, calculated after deducting expenses like cost of goods sold and wages.

Expected Profit Rate

The forecasted return on an investment or business venture, calculated as the potential profit over time divided by the initial cost.

Interest Rate

The slice of a loan subjected to interest rates for the borrower, commonly conveyed as an annual percentage of the loan's remaining sum.