Which of the following signals is most likely to elicit a decrease in share price?
A)a repurchase of 5% of the firm's stock
B)an increase in the regular quarterly dividend
C)a decrease in the regular quarterly dividend
D)borrowing funds in order to pay a cash dividend

Question

Quizplus · Accepted Answer

A decrease in the regular quarterly dividend is likely to signal to investors that the company's financial health may be deteriorating, leading to a decrease in share price. A repurchase of stock or an increase in dividend may be seen as positive signals and could lead to an increase in share price. Borrowing funds to pay a cash dividend may also be seen as a negative signal, but it is not as directly linked to the company's financial health as a decrease in regular dividends.

Which of the Following Signals Is Most Likely to Elicit