Why Are Dividend Changes Rather Than Their Absolute Level Perceived

question 55

Multiple Choice

Why are dividend changes rather than their absolute level perceived to be more important to managers and shareholders?

• A) Managers change dividends only under threatening conditions.
• B) Dividend changes are thought to signal future expectations.
• C) MM state that the absolute level of dividends is irrelevant.
• D) Changes determine whether borrowing must occur.

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Definitions:

Variable Costing

A costing method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in the cost of goods sold and treats fixed overhead as a period expense.

Activity Base

A measure used to assign costs in activity-based costing, reflecting the volume of activity that drives costs.

Service Firm

A business that provides intangible products or services to consumers or other businesses.

Contribution Margin

The amount remaining from sales revenue after variable expenses are deducted, contributing to covering fixed costs and generating profit.