Which of the following conclusions about dividend policy is reasonable?
A)An inverse relation should exist between the amount of acceptable investments a firm has and the dividends remitted to investors.
B)Management's actions regarding dividends might carry greater weight than a statement by management that earnings will be increasing.
C)Management should avoid surprising investors when it comes to the firm's dividend decision.
D)All of the above are reasonable.

Question

Quizplus · Accepted Answer

All three conclusions are reasonable. Dividend policy should take into account the amount of acceptable investments a firm has, as remitting dividends might reduce the amount available for investment. Management's actions regarding dividends can signal important information about the future prospects of a company, and their decisions might carry more weight than just a statement that earnings will be increasing. Finally, surprising investors with an unexpected dividend decision might lead to a negative reaction from the market, so management should try to communicate their intentions clearly and avoid surprises.

Which of the Following Conclusions About Dividend Policy Is Reasonable