Three of the Following Considerations May Suggest That the Firm

question 60

Multiple Choice

Three of the following considerations may suggest that the firm should start paying out cash to its shareholders.Which one is not a relevant consideration?

• A) Is the company generating positive free cash flow?
• B) The company is earning a high profit margin?
• C) Does the company have sufficient cash for emergencies and unexpected investment opportunities?
• D) Is the debt ratio prudent?

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Definitions:

Policymakers

Individuals or groups responsible for making decisions on public policy in various areas like economy, education, and health.

Stabilize

To make or become stable or more stable; in economic terms, to reduce fluctuations in economic activity.

Federal Reserve Act

A U.S. legislation in 1913 that established the Federal Reserve System as the central banking system of the United States, designed to provide the country with a safer, more flexible, and more stable monetary and financial system.

Fed

The Federal Reserve System, which is the central banking system of the United States, responsible for monetary policy and financial regulation.