When managers ________ the dividend,it may signal that they have ________ hope that earnings will rebound in the near term and so need to reduce the dividend to save cash.
A) raise; given up
B) cut; given up
C) cut; gained
D) raise; gained

Question

Quizplus · Accepted Answer

When managers cut the dividend, it means they are reducing the amount of money they distribute to shareholders. This action is usually taken when a company is experiencing financial difficulties or when managers don't have hope that the earnings will rebound anytime soon. Therefore, the best choice is B, which implies that managers have cut the dividend and have given up hope that earnings will rebound soon.

When Managers ________ the Dividend,it May Signal That They Have