Financial managers are generally reluctant to cut dividends because they know it can have a negative impact on stock prices and shareholder confidence. They also recognize that consistent dividend payments are often high on the list of priorities for investors. Therefore, they usually try to maintain a stable dividend policy to the best of their ability.

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Financial Managers

Question 24

Multiple Choice

Financial managers:

A) tend to ignore past dividend policies.
B) are reluctant to cut dividends.
C) tend to prefer cutting dividends every time quarterly earnings decline.
D) place little emphasis on dividend policy consistency.
E) prefer cutting dividends over incurring flotation costs.

Correct Answer: