The Increase in the Stock Price After a Dividend Increase

question 32

Multiple Choice

The increase in the stock price after a dividend increase is called the information content effect because:

• A) the change in dividend was expected by shareholders.
• B) the dividend increase signaled investors to adjust the expectations of future earning upward.
• C) the dividend change signaled investors to adjust the risk of the firm downward.
• D) the dividend change signaled shareholders that the firm could now payout more as they enter the mature phase of their business.

Develop skills in preparing a cash budget and managing cash flow, including estimating cash receipts and disbursements.

Understand the principles of cost estimation and the influence of variable and fixed costs on the total cost of production.

Grasp the relationship between sales, production, direct material, direct labor, and overhead costs in budget preparation.

Analyze budgeted financial statements to identify potential cash shortages and the need for external financing.

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Definitions:

Actual Rates

The current, real-time rates or prices for services, goods, or financial products in the market.

Transfer Price

The price at which goods or services are traded between divisions within the same company.

Internal Transfers

Internal transfers involve the movement of assets, funds, or resources from one part of an organization to another. This can include financial transactions or the reallocation of personnel and materials within the company.

Reported Profits

The net income as stated in a company’s financial statements, reflecting revenues minus expenses, including taxes and cost of goods sold.