The Information Content of a Dividend Increase Generally Signals That

question 69

Multiple Choice

The information content of a dividend increase generally signals that:

• A)the firm has a one-time surplus of cash.
• B)the firm has few, if any, net present value projects to pursue.
• C)management believes earnings growth will be strong going forward.
• D)the firm has more cash than it needs due to a decline in future orders.
• E)dividends thereafter will be lower.

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Definitions:

Impairment Test

An examination to determine if an asset's carrying value exceeds its recoverable amount, indicating if the asset is impaired.

Future Cash Flows

Estimates of the amount of money expected to be received or paid out over future periods.

Asset

Resources owned or controlled by a business, expected to provide future economic benefits.

Double-Declining-Balance

A method of accelerated depreciation that doubles the normal depreciation rate, allowing more depreciation in the earlier years of an asset’s life.