A Residual Dividend Policy Differs from a Stable Dividend Policy

question 34

Multiple Choice

A residual dividend policy differs from a stable dividend policy in the following respect:

• A)Dividends can only be stable under a residual policy if profits are constant.
• B)Dividends under the residual policy method fluctuate from year to year depending on profits.
• C)Dividends are a function of profits under the stable policy method but are a function of investment needs under the residual policy method.
• D)Dividends are a function of long-term profits under the stable policy method but are a function of investment needs under the residual policy method.

---

Definitions:

Cyclical Nature

The inherent tendency of markets, economies, or certain stocks to move in cycles, experiencing periods of expansion and contraction.

Peak Periods

Times of maximum activity, demand, or use, typically stressing the capacity, resources, or systems involved.