Which of the Following Statements About Dividend Policies Is CORRECT

question 6

Multiple Choice

Which of the following statements about dividend policies is CORRECT?

• A) Miller and Modigliani argued that investors prefer dividends to capital gains because dividends are more certain than capital gains. They call this the "bird-in-the-hand" effect.
• B) One reason that companies tend to favor distributing excess cash as dividends rather than by repurchasing stock is that dividends are normally taxed at a lower rate than gains on repurchased stock.
• C) One advantage of dividend reinvestment plans is that they allow shareholders to delay paying taxes on the dividends that they choose to reinvest.
• D) One key advantage of the residual dividend model is that it enables a company to follow a stable dividend policy.
• E) The clientele effect suggests that companies should follow a stable dividend policy.

---

Definitions:

Inventory Control

The systematic approach to ordering, storing, and using a company's inventory, ensuring adequate supply without excessive oversupply.

Quick Response System

A management approach designed to increase the efficiency of inventory management by reducing lead times and thus responding faster to market demand.

Fashion Industry

A global sector dedicated to the business of creating, manufacturing, and distributing clothing, footwear, and accessories.

Logistical Overlay

Applying additional layers of planning and implementation to ensure efficient and effective transportation, warehousing, and delivery of goods.