The Fact That Firms Continue to Issue Dividends Despite Their

question 36

Multiple Choice

The fact that firms continue to issue dividends despite their tax disadvantage is often referred to as the ________.

• A) issuance puzzle
• B) dividend puzzle
• C) payback puzzle
• D) policy puzzle

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Definitions:

Forecast Earnings

An estimate of a company's future earnings per share over a specific period, often used by analysts to project future financial performance.

ROE

Return on Equity, a measure of the profitability of a business in relation to the equity, calculated as net income divided by shareholder's equity.

Plowback

The reinvestment of earnings by a company back into its business, often for expansion or development; also known as retained earnings.

PEG Ratio

A stock's price-to-earnings ratio divided by the growth rate of its earnings, used to determine the relative trade-off between the price of a stock, the earnings generated per share, and the company's expected growth.