Which of the Following Statements Is Most Correct

question 24

Multiple Choice

Which of the following statements is most correct?

• A) The bird-in-the-hand theory would predict that companies could decrease their cost of equity financing by raising their dividend payout.
• B) The clientele effect can explain why firms often change their dividend policies.
• C) One advantage of adopting a residual distribution policy (with all distributions in the form of dividends) is that it makes it easier for corporations to maintain dividend clienteles.
• D) Answers a and c are correct.
• E) None of the answers above is correct.

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Definitions:

Unclassified Balance Sheet

A simple format of a balance sheet where assets, liabilities, and equity are listed in a single column without categorizing them into subcategories.

Accounts

Accounts refer to the records of financial transactions, reflecting credits and debits in the financial statements of a business or an individual.

General Ledger

A complete record of all the financial transactions of a company, organized by accounts, which provides the data used to create financial statements.

Chart of Accounts

An organized list of all the account titles and numbers used in the ledger of a company to classify transactions.