One Possible Reason That Shareholders Often Insist on Higher Dividends

question 4

Multiple Choice

One possible reason that shareholders often insist on higher dividends is:

• A) They agree with Miller and Modigliani
• B) Tax consideration
• C) The stock market is efficient
• D) They do not trust managers to spend retained earnings wisely

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Definitions:

Revenue and Expense Accounts

Accounts used in accounting to track the income generated and expenses incurred by a business, integral to determining net profit or loss.

Income Summary

An account in accounting used to gather all revenue and expenses for a period to calculate net income (or loss).

Owner's Drawings

The amount of cash or other assets withdrawn by the owner from the business for the owner's personal use.

Net Income

The amount of profit earned by a business after all expenses and taxes have been subtracted from total revenue.