Which One of the Following Tends to Be the Primary

question 4

Multiple Choice

Which one of the following tends to be the primary attitude of firms' towards their dividend policy?

• A) Dividends should be increased annually no matter what.
• B) Dividends should be flexible and adjusted annually in response to changes in the firm's earnings.
• C) The costs associated with cutting dividends are perceived to be less than the costs of obtaining external financing.
• D) Once a dividend is increased, it should not be decreased.
• E) Dividend smoothing is talked about but is not really a factor that affects dividend decisions.

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Definitions:

Bad Debts

Accounts receivable that are considered uncollectible and are written off as a loss.

General Operating Expenses

These are the day-to-day expenses necessary for the management and administration of a business, such as rent, utilities, and payroll.

Collections

The process of pursuing payment on debts owed by individuals or businesses, typically involving accounts receivable.

Credit Sales

Transactions where the buyer purchases goods or services on credit, agreeing to pay the seller at a later date, thus generating accounts receivable for the seller.