Because ________ are seen as an implicit commitment, they send a ________ signal of financial strength to shareholders.
A) regular dividends, strong
B) dividends, weak
C) repurchases, strong
D) repurchases, weak

Question

Quizplus · Accepted Answer

Regular dividends are seen as an implicit commitment to shareholders, indicating that a company has a stable financial position and a predictable flow of earnings available to distribute. This sends a strong signal of financial strength to shareholders. On the other hand, repurchases, while also indicating a company's confidence in its financial position, do not provide the same level of commitment or predictability as regular dividends, and therefore sends a weaker signal of financial strength.

Because ________ Are Seen as an Implicit Commitment, They Send