According to the Residual Theory of Dividends, If a Firm's

question 119

Multiple Choice

According to the residual theory of dividends, if a firm's equity need exceeds the amount of retained earnings, the firm would ________.

• A) borrow to pay the cash dividend
• B) sell additional stock to pay the cash dividend
• C) pay no cash dividends
• D) pay less dividends

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Definitions:

Unemployment Rate

The proportion of the workforce that is unemployed and actively seeking work.

Long-run Phillips Curve

An economic concept that represents the relationship between inflation and unemployment when the effects of short-term shocks have dissipated, showing no trade-off between inflation and unemployment in the long run.

Natural Rate

A concept in economics referring to the level of unemployment at which there is no cyclical or deficient-demand unemployment. It represents a balance between the supply of labor and job vacancies, considering that some frictional and structural unemployment is inevitable.

Unemployment

The situation in which individuals who are capable of working and are seeking employment are unable to find work.