All of the following conclusions on the importance of a dividend policy are true EXCEPT
A) as a firm's investment opportunities increase, the dividend payout ratio should decrease.
B) the firm's expected earning power and the riskiness of these earnings are more important to the investor than the dividend policy.
C) dividends may influence stock price by the investor's desire to minimize and/or defer taxes and from the role of dividends in minimizing agency costs.
D) in order to avoid surprising investors, management should anticipate financing needs for the short-term, but not for the long term.

Question

Quizplus · Accepted Answer

The statement in choice D is incorrect as management should anticipate financing needs for both short-term and long-term to avoid surprising investors. The other statements are true.

All of the Following Conclusions on the Importance of a Dividend