Which Statement Most Accurately Describes Dividend Irrelevance

question 28

Multiple Choice

Which statement most accurately describes dividend irrelevance?

• A)Dividends are irrelevant because investors are only interested in company profits,not cash distributions from those profits.
• B)For each dollar received as dividends,the original shareholders give up future dividends with a present value of one dollar,which reduces the value of their shares by one dollar.
• C)For each dollar received in dividend,the original shareholders give up future dividends with a present value of one dollar,which maintains the value of their shares.
• D)None of the given options.

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Definitions:

Preemptive Rights

Rights that allow existing shareholders the opportunity to buy new shares of a company's stock before it is offered to the public, often to maintain their percentage of ownership.

Liquidation Preference

Liquidation preference is a term used in finance and investments to describe the priority of repayment to investors of a company's shares if the company liquidates, goes bankrupt, or is sold.

Class A Preferred

A type of preferred stock that provides holders with specific financial advantages, such as priority in dividend payments or asset distribution over other classes of stock.

Corporate Assets

All owned items of value, including tangible and intangible properties, that belong to a corporation.