Why May a Large Increase in Earnings Not Translate into a Large

question 8

Multiple Choice

Why may a large increase in earnings not translate into a large increase in dividends?

• A) The earnings will be taxed.
• B) Some investors may prefer capital gains.
• C) Managers wish to assess the earning's persistence.
• D) The earnings may already be a part of retained earnings.

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Definitions:

Smooth Muscle

A type of muscle found in the walls of internal organs and blood vessels, functioning involuntarily to regulate bodily processes.

Bronchioles

Small airways in the lungs that branch off from the bronchi, leading to the alveoli where gas exchange occurs.

Ciliary Action

The movement of cilia, small hair-like structures, to move particles or fluid over their surface, commonly seen in respiratory and reproductive tracts.

Smooth Muscle

Involuntary, non-striated muscle found in the walls of internal organs such as the stomach, intestines, and blood vessels.