All of the Following Conclusions on the Importance of a Dividend

question 59

Multiple Choice

All of the following conclusions on the importance of a dividend policy are true except:

• A) as a firm's investment opportunities increase, the dividend payout ratio should decrease.
• B) the firm's expected earning power and the riskiness of these earnings are more important to the investor than the dividend policy.
• C) dividends may influence stock price by the investor's desire to minimize and/or defer taxes and from the role of dividends in minimizing agency costs.
• D) in order to avoid surprising investors, management should anticipate financing needs for the short-term, but not for the long term.

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Definitions:

Vascular Disease

A class of diseases involving the blood vessels (arteries, veins, and capillaries) that can lead to major health problems, such as heart attack or stroke.

Successive Strokes

Consecutive movements or hits, often used in the context of writing, painting, or playing musical instruments.

Middle Age

A period of adult life typically regarded as occurring from around 45 to 65 years of age, characterized by personal, social, and career transitions.

Later-Onset Alzheimer's

A form of Alzheimer's disease, typically developing after the age of 65, and is the most common variant of the disease.