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Informational Content of Dividends Throws Light with Respect to Future

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Informational content of dividends throws light with respect to future earnings. In other words, investors view a change in dividends, up or down, as a signal that management expects future earnings to change in the same direction.


Definitions:

Strike Price

The predetermined price at which the holder of an option has the right to buy (in the case of a call option) or sell (in the case of a put option) the underlying security or commodity.

Put Option

This is a financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

Strike Price

The set price at which an option contract can be bought (call option) or sold (put option) when it is exercised.

Total Profit

The total income a business generates after all expenses and costs have been subtracted from total revenue.

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