Question

_________ policy involves the decision to pay out earnings to shareholders or to retain and reinvest them in the firm. When distributing income to stockholders there are three key issues to consider: (1) How much 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_______ ratio is defined as the percentage of net income distributed as cash dividends, and it should be based on investors' preferences for dividends versus capital gains. Any change in this ratio will have two opposing effects: (1) If dividends are increased, then taken alone 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_______ and this will tend to _______the firm's stock price. The _______dividend policy is the one that strikes a balance between current dividends and future growth _______and the firm's stock price.

Answer 1

The blanks anwers are below

Step-by-step explanation:

Kindly consider blanks in order:

Payout policy

Repurchasing

Maximize

Payout

Rise/Increase

Decline

Decrease

Sustainaible

maximizes

Some blanks may not match. The answers are correct although.