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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