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What is the most likely prediction after a firm reduces its regular dividend payment? Select one: a
What is the most likely prediction after a firm reduces its regular dividend payment?
Select one:
a.
Capital investments are likely expected to increase
b.
Future profits are likely expected to decline
c.
Share price is likely expected to increase
d.
Company is likely going to pay back it's interest bearing debt
Expert Solution
Option (b) is correct
When a firm reduces its regular dividend payment, it may be presumed that future profits are likely to decline. Dividends are paid out of profits. When it is probable that there will be lesser profits in future then the firm may reduce the regular dividend payments.
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