The Clientele Effect Suggests That Firms Can Change Their Dividend

question 6

True/False

The clientele effect suggests that firms can change their dividend policy frequently with no potential adverse effect on the firm.

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Definitions:

Compound Interest

Interest calculated on the initial principal as well as on the accumulated interest of previous periods of a deposit or loan.

Present Value

The value at present of future cash earnings or accumulations of money, determined by applying a pre-specified rate of financial return.

Current Liability

A company's debts or obligations that are due within one year.

Goods

Physical items that are produced, bought, or sold by businesses in the course of their operations.