Why Are Dividend Changes Rather Than the Absolute Level of Dividends

question 92

Multiple Choice

Why are dividend changes rather than the absolute level of dividends 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's argument states that the absolute level of dividends is irrelevant.
• D) Dividend changes determine whether borrowing must occur.

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Definitions:

Journal Entries

Journal entries are the recordings of financial transactions in the books of accounts, serving as the primary input in the accounting system.

Doubtful Accounts

Accounts receivable considered unlikely to be collected, prompting businesses to create allowances for bad debts.

Bad Debts Adjustment

An accounting entry made to account for invoices that are not expected to be collected due to customer default.

Accounts Receivable

Represents the money owed to a company by its customers for goods or services delivered but not yet paid for.