A Justification for No Dividend Payments That Would Be Pleasing

question 52

Multiple Choice

A justification for no dividend payments that would be pleasing to shareholders could be

• A) insufficient cash available for dividend payments.
• B) positive NPV investment projects that require the firm to retain cash for investment purposes.
• C) an investor clientele that prefers current liquidity.
• D) cash will be used for a stock dividend.

---

Definitions:

Income Effect

How an alteration in the income of an individual or the economy influences the demand level for a particular product or service.

Substitution Effect

The shift in consumption tendencies brought on by changes in the relative value of goods, compelling consumers to opt for an alternative product.

Utility Function

A mathematical representation that ranks alternatives according to their utility for an individual, illustrating preferences over a set of goods and services.

Substitution Effect

The change in consumption that results from a change in the price of one good relative to the prices of other goods, holding utility constant.