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:

Inflation Rate

The magnitude of price escalation for goods and services across the board, causing a drop in consumer purchasing prowess.

Inflation Rate

The percentage increase in the general price level of goods and services in an economy over a given period, often measured annually.

GDP Deflator

An assessment tool for the prices of all new, domestically created, final goods and services in an economy.

Inventory

The total amount of goods and materials held in stock by a business.