Modigliani and Miller, Recognizing That Dividends Do Somehow Affect Stock

question 86

Multiple Choice

Modigliani and Miller, recognizing that dividends do somehow affect stock prices, suggest that positive effects of dividend increases are attributable

• A) directly to the dividend policy.
• B) directly to the optimal capital structure.
• C) not to the informational content but to the consistency in the payment of dividends.
• D) not to the dividend itself but to the informational content of the dividends with respect to future earnings.

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Definitions:

Finished Goods Inventory

Merchandise that has finished the production phase but has not yet been delivered or sold to purchasers.

Process Costing

A method of costing used in manufacturing where the cost of products is determined by averaging over units produced, typically used in industries where the production is continuous.

Factory Wages

Compensation paid to workers who are directly involved in the production process in a manufacturing setting.

Indirect Labor

Labor costs associated with support operations, not directly involved in the production of goods or services, such as maintenance and cleaning staff.