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Basic Question 6 of 6
Which of the following statements is false?
B. Dividends convey no information about the earnings prospects of the firm because any firm can increase its dividend payments if it so chooses.
C. The dividend decision is often an important managerial tool. According to the dividend signaling hypothesis, dividend changes provide an effective way for management to convey believable information to the market about the firm's expected future cash flows.
A. Firm managers typically have better information about the firm than the firm's investors.
B. Dividends convey no information about the earnings prospects of the firm because any firm can increase its dividend payments if it so chooses.
C. The dividend decision is often an important managerial tool. According to the dividend signaling hypothesis, dividend changes provide an effective way for management to convey believable information to the market about the firm's expected future cash flows.
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I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
describe types of information (signals) that dividend initiations, increases, decreases, and omissions may convey;
explain how agency costs may affect a company's payout policy;
CFA® 2025 Level II Curriculum, Volume 3, Module 16.