When a Firm Begins to Pay Dividends, It Is Signalling

question 14

True/False

When a firm begins to pay dividends, it is signalling that it always expects to have enough cash flow to maintain and increase its dividend payout.

---

Definitions:

Net Working Capital

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

Cash Expenses

Payments that a business makes in cash, including operating expenses, purchasing of goods, and other transactions.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting wear and tear, deterioration, or obsolescence.

Top-Down Approach

An analysis method that begins with global or macroeconomic factors before drilling down into the specifics of individual securities or sectors.