Which of the Following Must Be True for the Dividend

question 122

Multiple Choice

Which of the following must be true for the dividend irrelevance theory to apply?

• A)Transaction costs must be small.
• B)Floatation costs must be small.
• C)Ordinary income and capital gains must be taxed at nearly the same rate.
• D)Both a. and c. are correct.
• E)All of the above are correct.

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Definitions:

Common-size Statements

Financial statements that display line items as a percentage of a common base figure, facilitating comparisons across time periods or companies.

Comparative Financial Statement

Comparative financial statements present the financial position and results of operations for a business across multiple periods, allowing for analysis of trends and financial performance over time.

Base Period

A specific time period against which conditions in other time periods are compared, often used in index numbers or to measure economic growth.

Estimated Period

A time frame within which certain financial projections or the useful life of an asset is expected to occur.