When a Firm Pays Out a Dividend, the Share Price

question 78

Multiple Choice

When a firm pays out a dividend, the share price ________, and when it conducts a share repurchase at the market price, the share price ________.

• A) increases, increases
• B) is unchanged, decreases
• C) decreases, decreases
• D) decreases, is unchanged

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Definitions:

Credit

Credit refers to the trust which allows one party to provide resources (money, goods, services) to another party wherein the second party does not reimburse the first party immediately but promises to return or repay those resources (with or without interest) at a later date.

Cash Account

An account that records all transactions involving the exchange of cash.

Debited

An accounting term that refers to an entry on the left side of an account ledger, representing an increase in assets or a decrease in liabilities or equity.

Prepaid Expenses

Expenses paid in advance for benefits to be received in the future, recorded as assets on a balance sheet until used.