Question: According to the residual theory of dividends how does a
According to the residual theory of dividends, how does a firm set its dividend? With which dividend policy is this theory most compatible? Does it appear to be empirically validated?
Answer to relevant QuestionsWhat do you think the typical stock market reaction is to the announcement that a firm will increase its dividend payment? Why? Which U. S. industries are characterized by relatively high dividend payout ratios? Are these same industry patterns observed in other industrialized countries? What explains these industry patterns? A company decides to compete by making a major investment to modernize production facilities. Describe two ways in which meeting this objective might force a firm to sacrifice other objectives. Why might pro forma statements and the equation for external funds required yield different projections for a firm’s financing needs? Why should a firm actively monitor the accounts receivable of its credit customers? How does each of the following credit monitoring techniques work: (a) Average collection period, (b) Aging of accounts receivable, and (c) ...
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