Fin test 3 sec #1

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  1. what are dividends?
    they're distribution from the firm's assets to the shareholders
  2. firms aren't obligated to
    pay dividends or maintain a consistent policy with regard to dividends
  3. dividends could be paid in
    cash or stocks
  4. a firms dividend policy includes two components:
    dividend payout ratio and stability of dividends over time
  5. dividend payout ratio
    indicates amount of dividend paid relative to the company's earnings (i.e. dividends per share is $1 and earnings per share is $2,ratio is 50% (1/2)
  6. decision to pay a large dividend means:
    retaining less of the firm's profits and firm relies more on external equity financing
Card Set
Fin test 3 sec #1
fin test 3 dividends section #1
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