The Information Content Effect Implies That Stock Prices Will Rise

question 31

Multiple Choice

The information content effect implies that stock prices will rise when dividends are increased provided that the dividend increase:

• A)is denoted as a one-time event.
• B)causes stockholders to increase their expectations of future cash flows.
• C)is greater than the average historical dividend increase.
• D)is substantial in both dollar amount and percentage terms.
• E)is combined with a stock repurchase.

Identify the recognition and measurement principles for share-based payment transactions.

Analyze vesting conditions and their impact on share-based payment transactions.

Compute the fair value of share options and understand the factors affecting fair value measurement.

Account for modifications, cancellations, and settlements of share-based payment arrangements.

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Definitions:

Experimental Research

A research method involving the manipulation of variables to establish cause-and-effect relationships.

Cause and Effect

The principle that actions or events lead to a certain consequence or outcome, wherein the cause is why something happens, and the effect is what happens.

Arithmetic Mean

The sum of a set of numerical values divided by the number of values in the set, commonly known as the average.

Average

A statistical measure representing the central or typical value in a set of data, calculated mainly as the mean or median.