Question

When​ firms' earnings​ fluctuate, they tend to adjust their payout policy by​ ________. A. allowing dividends to fluctuate while holding share repurchases relatively steady B. stop paying dividends and repurchasing shares C. adjusted both dividends and share repurchases so the total payout as a percentage of earnings remains relatively steady D. allowing share repurchases to fluctuate while holding dividends relatively steady

Answer 1

Answer:

D. allowing share repurchases to fluctuate while holding dividends relatively steady

Explanation:

Holding dividend relatively steady will help the firm to adjust their policy and use share repurchase as a tool to manage the dividend payout. In case of higher earning the firm pays a steady dividend will save some earning for share repurchase and hold it. Whenever earning drops to effect the steady payout ratio sell the share to maintain the payout ratio. This is the most suitable option in fluctuating earning environment.

Answer 2

Answer:

The answer to this question is option D.

Explanation:

When​ firms' earnings​ fluctuate, they tend to adjust their payout policy by allowing share repurchases to fluctuate while holding dividends relatively steady