20. Dividend Policy. Here are several assertions about typical
corporate dividend policies. Which of them are true? Write out a
corrected version of any false statements.
a. Most companies set a target dividend payout ratio.
b. They set each year?s dividend equal to the target payout ratio
times that year?s earnings.
c. Managers and investors seem more concerned with dividend changes
than dividend levels.
d. Managers often increase dividends temporarily when earnings are
unexpectedly high for a year or two.

21. Dividend Policy. For each of the following four groups of
companies, state whether you would expect them to distribute a
relatively high or low proportion of current earnings and whether you
would expect them to have a relatively high or low price-earnings
ratio.
a. High-risk companies.
b. Companies that have recently experienced a temporary decline in profits.
c. Companies that expect to experience a decline in profits.
d. ?Growth? companies with valuable future investment opportunities.

TO QUESTION 21
	
a.	Distributes a relatively low proportion of current earnings to
offset fluctuations in operational cash flow; lower P/E ratio.

b.	Distributes a relatively high proportion of current earnings since
the decline is unexpected, higher P/E ratio.

c.	Distributes a relative low proportion of current earnings to offset
anticipated declines in earnings; lower P/E ratio.

	d.	Distributes a relatively low proportion of current earnings to
fund expected growth; higher P/E ratio.