Which of the Following Statements Best Describes the Theories of Investors

question 45

Multiple Choice

Which of the following statements best describes the theories of investors' preferences for dividends?

• A) Modigliani and Miller argue that investors prefer dividends to capital gains.
• B) The bird-in-hand theory suggests that a company can reduce its cost of equity capital by reducing its dividend payout ratio.
• C) The tax preference theory suggests that a company can increase its stock price by increasing its dividend payout ratio.
• D) One key advantage of a residual distribution policy (with all distributions as dividends) 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.

Understand the global impact of inequality and the distribution of resources.

Understand the role and influence of individual differences in predicting behaviors.

Identify the key theoretical approaches to personality and their foundational theorists.

Analyze the concept of traits and their importance in personality psychology.

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Definitions:

Lessen Competition

A situation or strategy in which there is a reduction in the intensity of competitive forces within a market or industry.

Patent Legislation

Laws that grant inventors exclusive rights to their inventions, preventing others from making, using, or selling the invention without permission.

Federal Trade Commission

A federal agency established to promote consumer protection and the elimination and prevention of anticompetitive business practices.

Wheeler-Lea Act

A United States law that amended the Federal Trade Commission Act to prohibit unfair or deceptive acts in commerce.