All of the following conclusions on the importance of adividend policy are true

Question

All of the following conclusions on the importance of adividend policy are true except:
a. As a firm's investment opportunities increase, the dividendpayout ratio should decrease. b. The firm's expected earning power and the riskiness ofthese earnings are more important to the investor than the dividendpolicy. c. Dividends may influence stock price by the investor'sdesire to minimize and/or defer taxes and from the role ofdividends in minimizing agency costs. d. In order to avoid surprising investors, management shouldanticipate financing needs for the short-term, but not for the longterm. All of the following conclusions on the importance of adividend policy are true except:
a. As a firm's investment opportunities increase, the dividendpayout ratio should decrease. b. The firm's expected earning power and the riskiness ofthese earnings are more important to the investor than the dividendpolicy. c. Dividends may influence stock price by the investor'sdesire to minimize and/or defer taxes and from the role ofdividends in minimizing agency costs. d. In order to avoid surprising investors, management shouldanticipate financing needs for the short-term, but not for the longterm.

Explanation / Answer

All of the following are true except: d. In order to avoid surprising investors, management shouldanticipate financing needs for the short-term, but not for the longterm. Despite the stock markets' focus on short-term earnings, asuccessful firm should always anticipate financing needs for thelong term, especially for growth-oriented firms.

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