Which of the Following Statements Is CORRECT

question 51

Multiple Choice

Which of the following statements is CORRECT?

• A)If a firm follows the residual dividend policy, then a sudden increase in the number of profitable projects is likely to reduce the firm's dividend payout.
• B)The clientele effect can explain why so many firms change their dividend policies so often.
• C)One advantage of adopting the residual dividend policy is that this policy makes it easier for corporations to develop a specific and well-identified dividend clientele.
• D)New-stock dividend reinvestment plans are similar to stock dividends because they both increase the number of shares outstanding but don't change the firm's total amount of book equity.
• E)Investors who receive stock dividends must pay taxes on the value of the new shares in the year the stock dividends are received.

Identify common managerial missteps in finance that can lead to business failure.

Grasp the accounting equation and its components.

Understand the rationale behind the selection of cash basis vs accrual basis accounting methods.

Interpret the purpose and structure of financial statements effectively.

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Definitions:

Utility Function

A mathematical representation of how different combinations of goods or services produce varying levels of satisfaction or utility to a consumer.

Commodities

Fundamental commodities traded in business that can be exchanged with others of alike kind.

Units Of Good

Measurement quantities used to quantify the amount, number, or level of goods.

Utility Function

A mathematical representation that assigns a value to every possible bundle of goods or services, with the value indicating the level of satisfaction or happiness that the consumer derives from that bundle.