Generally, investors interpret the announcement of a decrease in dividends as
A)bad news, and the stock price drops.
B)good news, and the stock price increases.
C)a nonevent that does not affect the stock prices.
D)very good news, and the stock price jumps up.

Question

Quizplus · Accepted Answer

Investors usually see a decrease in dividends as a sign of weakening financial position, leading to a drop in stock price. Companies use dividends to distribute earnings to shareholders, and if they reduce the dividends, it could indicate a decline in profits or financial trouble.

Generally, Investors Interpret the Announcement of a Decrease in Dividends