Which One of the Following Is an Argument in Favor

question 71

Multiple Choice

Which one of the following is an argument in favor of a low dividend policy?

• A) The tax on capital gains is deferred until the gain is realized.
• B) Few, if any, positive net present value projects are available to the firm.
• C) A preponderance of stockholders have minimal taxable income.
• D) A majority of stockholders have other investment opportunities that offer higher rewards with similar risk characteristics.
• E) Corporate tax rates exceed personal tax rates.

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Definitions:

Costs and Expenses

The consumption of resources or services in the production of goods or in providing services, resulting in financial outlay.

Income

Revenue earned by a business or individual, resulting from their activities or investments.

Variable Costing

An accounting method that only allocates variable costs to product costs, excluding fixed factory overhead.

Direct Costing

A pricing strategy that only accounts for direct costs in the production of goods, excluding fixed overhead expenses.