Automatic Dividend Reinvestment Plans Allow Firms To

question 57

Multiple Choice

Automatic dividend reinvestment plans allow firms to:

• A) pay dividends on a more frequent schedule.
• B) reduce their cash outflow to shareholders.
• C) transform regular dividends into stock dividends.
• D) avoid the ex-dividend date reduction in stock price.

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Definitions:

Variable Cost

Costs that vary directly with the level of production or sales volume, such as materials and labor directly involved in creating a product.

Advertising Spending

The amount of money a company uses for its advertising efforts to promote its products or services.

Contribution Margin

Contribution Margin is the difference between sales revenue and variable costs of production, indicating how much revenue contributes to fixed costs and profit.

Contribution Format

A financial reporting format that highlights the contribution margin, used primarily in internal decision-making processes.