should be distributed? $(2)$ Should the distribution be in the form of dividends, or should the cash be passed on to shareholders by

stock? $(3)$ How stable should the distribution be$?$

When deciding how much cash to distribute, a firm's managers must remember that the firm's objective is to shareholder value. The target $-$Selectratio is defined as the percentage of net income this will cause the firm's stock price to$(2)$ However, an increase in dividends will also cause the firm's expected growth rate to $-$Selectand this will tend to $-$Selectthe firm's stock price. The $3$ dividend policy is the one that strikes a balance between current dividends and future growth and $-$Selectthe firm's stock price.