The Failure of a Firm That Adheres to a Residual

question 126

Multiple Choice

The failure of a firm that adheres to a residual dividend policy to pay a dividend implies that:

• A)the dividend payout ratio has increased.
• B)all of the firm's earnings were spent on capital budgeting projects.
• C)the dividend payout ratio has remained unchanged.
• D)the growth prospects of the firm have slackened.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating short-term financial health.

Financial Data

Financial data encompasses quantitative information about a business's financial position, performance, and cash flows, typically found in financial statements.

Sales On Account

Transactions where revenue is recorded when a sale is made but the cash is collected at a later date.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations by dividing current assets by current liabilities.