How May a Reduction in Cash Dividends Be in the Best

question 102

Multiple Choice

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

• A) A reduction of cash dividends is always in the best interests of current shareholders.
• B) The firm will have available cash to increase current investment and future profits.
• C) Reduced dividends increase managerial compensation, thus increasing managers' motivation.
• D)A reduction of cash dividends cannot be in the best interests of current shareholders.

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Definitions:

Rationale

The underlying reason or logical basis for a decision, action, or belief, often used in argumentation or analysis.

Freedom To Farm Act

A law passed in 1996 that revamped 60 years of U.S. farm policy by ending price supports and acreage allotments for wheat, corn, barley, oats, sorghum, rye, cotton, and rice.

Subsidies

Financial assistance provided by the government to businesses or individuals, often to support industries or activities considered beneficial.

Federal Government

The central government of a country, which holds the primary authority over its subdivisions and is responsible for national policies.