Most firms are reluctant to ________ because of the associated implications concerning the firm. A) Pay...
Most firms are reluctant to ________ because of the associated implications concerning the firm.
A) Pay a liquidating dividend.
B) Pay a special dividend.
C) Increase a cash dividend.
D) Reduce a regular cash dividend.
E) Pay an extra dividend.
Homework Answers
D) Reduce a regular cash dividend.
This may spell trouble for the firm due to associated market sentiments associated with a reduction of dividends. Most investors and the market in general will perceive the dividend cut as loss of earnings. This will have an adverse effect on the stock price which will be detrimental in nature to the entire business.
The other options do not have such a deep and direct impact on the firm.In fact investors will be happy to receive the additional dividend though their expectations will increase.
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