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11.       Gulf Coast Commerce follows a constant payout ratio when determining the amount of dividends it pays each year. As a result, which of the following statements about Gulf Coast Commerce is correct?

            a.      The dividends paid by Gulf Coast will be relatively constant from year to year, even if earnings vary.

            b.      The dividends paid by Gulf Coast will vary each year, even if earnings are constant.

            c.      The dividends paid by Gulf Coast will be fairly constant from year to year as long as earnings are fairly constant also.

            d.      The dividends paid by Gulf Coast will not be related to the firm’s earnings.

            e.      None of the above is correct.

 

According to the constant payout ratio dividend policy, the same percentage of earnings is paid as dividends each year. Thus, if earnings fluctuate, so do dividend payments; if earnings are constant, so are the dividend payments.

 

 

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