Which of the Following Statements Is Correct

question 38

Multiple Choice

Which of the following statements is correct?

• A) The clientele effect can explain why so many firms change their dividend policies so often.
• B) 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.
• C) 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.
• D) Investors who receive stock dividends must pay taxes on the value of the new shares in the year the stock dividends are received.
• E) 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.

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Definitions:

Regression Line

A line of best fit through a scatterplot of data points in regression analysis, showing the relationship between the independent and dependent variables.

Positive

A term often used in statistics to denote a value or outcome that is above zero or indicates the presence of a condition or characteristic.

Least Squares

A mathematical approach used to approximate the solution of overdetermined systems, minimizing the sum of the squares of the differences between observed and estimated values.

Squared Deviations

The square of the difference between each data point and the mean, used in variance calculation.