Question #20
Reading: Reading 15 Analysis of Dividends and Share Repurchases
PDF File: Reading 15 Analysis of Dividends and Share Repurchases.pdf
Page: 9
Status: Unattempted
Correct Answer: B
Question
Dividend safety is most likely evidenced by:
Answer Choices:
A. Increase in dividend and FCFE coverage ratios
B. Increase in dividend coverage ratio but not by FCFE coverage ratio
C. Increase in FCFE coverage ratio but not be dividend coverage ratio
Explanation
Both dividend and FCFE coverage ratios are indicators of dividend safety. FCFE coverage is
simply more comprehensive measure and takes into account all cash distributed to
shareholders.