Trenton Publishing Follows a Strict Residual Dividend Policy

question 67

Multiple Choice

Trenton Publishing follows a strict residual dividend policy.All else being equal,which circumstance would be most likely to lead to an increase in the firm's dividend per share?

• A)The firm's net income increases.
• B)The company increases the percentage of equity in its target capital structure.
• C)The number of profitable potential projects increases.
• D)Earnings are unchanged, but the firm issues new shares of common stock.

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Definitions:

Loss-Minimizing Level

The production level at which a firm minimizes its losses in the short run when it cannot cover total costs, but can cover variable costs.

Fixed Cost

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Variable Cost

Costs that change in proportion to the good or service that a business produces.

Profit

The financial gain obtained when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.