(Comp.) Dividend Concepts C R Answer: a MEDIUM

question 65

Multiple Choice

(Comp.) Dividend concepts C R Answer: a MEDIUM/

• A) If a firm follows the residual dividend policy, then a sudden increase in the number of profitable projects would be likely to lead to a reduction of the firm's dividend payout ratio.
• B) The clientele effect explains 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 a corporation to attract 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.

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Definitions:

Torts

Legal wrongs committed against a person or property, excluding breach of contract, for which the law provides a remedy.

Guarantees

Promises or assurances, usually in writing, that certain conditions will be fulfilled, often relating to the quality or durability of a product or service.

Parental Responsibility

The legal term for the duties, powers, responsibilities, and authority that most parents have in relation to their children, covering their care, property, and education.

Negligent

An individual or entity's failure to take reasonable care, resulting in harm or damage to others.