Achieving an Increased Return on Common Stock by Paying Dividends

question 141

Multiple Choice

Achieving an increased return on common stock by paying dividends on preferred stock at a rate that is less than the rate of return earned with the assets invested from the preferred stock issuance is called:

• A)Financial leverage.
• B)Discount on stock.
• C)Premium on stock.
• D)Preemptive right.
• E)Capital gain.

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Definitions:

Minimization

The strategy or action of reducing or keeping something to its smallest amount or degree.

Justification

The act of providing reasons or explanations for behaviors, decisions, or beliefs.

Eye Contact

Direct visual connection between two individuals, signifying various social and emotional meanings.

Physical Contact

The act of touching or being in direct contact with another person or object.