The Advantage of Using the Extra Dividend Policy Is That

question 117

Multiple Choice

The advantage of using the extra dividend policy is that ________.

• A) a firm can avoid giving false hopes to shareholders
• B) if a firm's earnings drop, so does the dividend payment
• C) the extra dividend may become a regular event
• D) cyclical shifts in earnings may be avoided

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Definitions:

Net Income

The amount of earnings a company or individual has after subtracting all expenses, taxes, and deductions from total revenue.

Depreciation

An accounting method of allocating the cost of a tangible or physical asset over its useful life, useful for reducing taxable income by recognizing the asset's expense over several years.

Rental Income

Income earned from leasing out property or space to tenants.

Self-employment Income

Income generated from conducting business as an independent contractor, freelancer, or business owner, rather than as an employee.