Which of the Following Statements Is FALSE

question 30

Multiple Choice

Which of the following statements is FALSE?

• A)Individuals in the highest tax brackets have a preference for stocks that pay high dividends,whereas tax-free investors and corporations have a preference for stocks with no or low dividends.
• B)To compare investor preferences,we must quantify the combined effects of dividend and capital gains taxes to determine an effective dividend tax rate for an investor.
• C)The dividend-capture theory states that absent transaction costs,investors can trade shares at the time of the dividend so that non-taxed investors receive the dividend.
• D)Differences in tax preferences create clientele effects,in which the dividend policy of a firm is optimized for the tax preference of its investor clientele.

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Definitions:

Estimate

An approximation or educated guess used to project future financial outcomes or the potential costs of projects.

Direct Write-off

The direct write-off method is an accounting practice where uncollectible debts are written off as an expense only when they are deemed unrecoverable.

Allowance Method

An accounting technique used to estimate uncollectible accounts receivable and adjust the carrying value of the accounts.

Receivables

Receivables are amounts owed to a company by its customers or other parties for goods or services delivered but not yet paid for.