Which of the Following Statements Is True

question 61

Multiple Choice

Which of the following statements is true?

• A) Dividend initiations send a weak signal to the market about management's assessment of the firm's long-run ability to general cash.
• B) Dividend initiations send a strong signal to the market about management's assessment of the firm's long-run ability to general cash.
• C) Dividend cuts rarely impact a firm's stock price.
• D) Dividend increases suggest a temporary increase in a firm's normal level of profitability.
• E) All of the above statements are false.

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Definitions:

Disposable Income

Refers to the sum of money available to families for spending and saving purposes once income taxes have been deducted.

APC

Average Propensity to Consume; the ratio of total consumption to total disposable income.

45-Degree Line

A graphical representation in economics, typically used in Keynesian cross diagrams, showing points where aggregate expenditure equals total output or income.

C Line

A reference in economic models, often representing the consumption function, which shows the relationship between consumption and disposable income.