If a Firm Adheres Strictly to the Residual Dividend Policy

question 36

Multiple Choice

If a firm adheres strictly to the residual dividend policy, the issuance of new common stock would suggest that

• A) the dividend payout ratio is increasing.
• B) no dividends were paid during the year.
• C) the dividend payout ratio is decreasing.
• D) the dollar amount of investments has decreased.
• E) the dividend payout ratio has remained constant.

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Definitions:

Inches

A unit of length in the British imperial and the United States customary systems of measurement, equal to 1/36 of a yard or 1/12 of a foot.

Walker

A type of mobility device, useful for patients who cannot safely use crutches or a cane.

Leaning Slightly

The act of inclining or tilting marginally from a vertical position.

Walkers

Assistive devices used to aid mobility, typically consisting of a frame with handles and legs, which a person can lean on and push forward to move.