The Problem with a Constant-Payout-Ratio Dividend Policy from the Shareholders

question 22

Multiple Choice

The problem with a constant-payout-ratio dividend policy from the shareholders' perspective is that ________.

• A) it pays constant dividend irrespective of the earnings of a firm
• B) if the firm's earnings drop, the dividends tend to be lower
• C) even when earnings are low, the company must pay a fixed dividend
• D) there is no uniformity in this type of dividend policy

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Definitions:

Change Of Actions

The process of modifying one's behavior or actions in response to external or internal factors.

Group Pressures

The influence exerted by a social group on individual members to behave in certain ways or conform to group norms and expectations.

Conformity

The act of changing one's behavior or beliefs in order to match those of others, typically as a result of real or imagined group pressure.

Door-In-The-Face Technique

A compliance method whereby a large request is made knowing it will be refused so that a subsequent, smaller request is more likely to be accepted.