Which of the Following Statements Is CORRECT

question 27

Multiple Choice

Which of the following statements is CORRECT?

• A) If a firm follows the residual dividend policy, then a sudden increase in the number of profitable projects is likely to reduce the firm's dividend payout.
• B) The clientele effect can explain 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 corporations to develop 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.

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Definitions:

Debt Crisis

A situation in which a country, organization, or individual cannot meet its financial obligations due to high levels of debt, leading to severe economic challenges.

Government Spending

The total amount of money expended by the government on various services, infrastructure, and public welfare.

Tax Revenues

The income gained by governments through taxation, which is used to fund public services and infrastructure.

Regulatory Capture

A situation where regulatory agencies are dominated by the industries they are supposed to regulate, leading to policies that benefit the industry at the expense of the public interest.