How May a Reduction in Cash Dividends Be in the Best

question 7

Multiple Choice

How may a reduction in cash dividends be in the best interests of current shareholders?

• A)Dividends are taxed at twice the rate of other gains.
• B)The firm will have available cash to increase current investment and future profits.
• C)Reduced dividends increase managerial compensation, thus increasing their motivation.
• D)A reduction of cash dividends cannot be in the best interests of current shareholders.

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Definitions:

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The mental act of retrieving knowledge or facts that one has already acquired or lived through.

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A conceptual framework that represents semantic relations between concepts in networks.

Interconnected

Linking together in a coherent or integrated way; having parts or elements that are connected or related.

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The process of initiating action or the state of being active, often used in contexts relating to physiological, neural, or psychological states of alertness and responsiveness.