Litner's model supports the belief that

Question

Quizplus · Accepted Answer

Litner's model is a dividend smoothing model, which means it suggests that corporations try to maintain stable dividend payouts by adjusting them gradually in response to changes in earnings. Therefore, option B is the correct choice as it aligns with Litner's model. Option A is not supported by Litner's model as it does not make any statement about the importance of dividends. Option C is incorrect because Litner's model suggests that dividends should be less volatile than earnings. Option D is also incorrect as Litner's model does not make any causation claim between earnings and dividends. Option E is also incorrect as the model predicts a stable relationship between earnings and dividends, rather than sync fluctuations.

Litner's Model Supports the Belief That