The Information Effect Suggests Dividend Policy Matters Because Dividends Act

question 16

True/False

The information effect suggests dividend policy matters because dividends act as a persuasive communications tool,signaling investors about the financial condition of the firm.

---

Definitions:

Pure Competitor

A firm in a purely competitive market that sells products identical to those of other firms, making it a price taker with no control over market price.

Pure Monopoly

A market structure where a single seller controls the entire supply of a product or service, with no close substitutes, leading to significant market power.

Profit-Maximizing Price

The price at which a company can sell its product or service to achieve the highest possible profit.

ATC

Average Total Cost, which is calculated by dividing total costs by the quantity of output produced.