In the Real World, Dividends

question 19

Multiple Choice

In the real world, dividends

• A) are usually more stable than earnings.
• B) fluctuate more widely than earnings.
• C) tend to be a lower percentage of earnings for mature firms.
• D) are usually changed every year to reflect earnings changes, and these changes are randomly higher or lower, depending on whether earnings increased or decreased.
• E) e.are usually set as a fixed percentage of earnings, e.g., at 40% of earnings, so if EPS = $2.00, then DPS will equal $0.80.Once the percentage is set, then dividend policy is on "automatic pilot" and the actual dividend depends strictly on earnings.

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Definitions:

Self-Employed Health Insurance

A deduction available for the premiums paid on a health insurance policy covering a taxpayer who is self-employed, their spouse, and dependents.

Individuals

Persons or entities such as single taxpayers, married couples, and heads of households that are subject to personal income tax.

Alimony

Financial payments made to a spouse or former spouse under a separation or divorce agreement.

Child Support

Financial support paid by a parent to help cover the living expenses of their child or children.