In Practice,there May Be an Increase in the Share Price

question 17

Multiple Choice

In practice,there may be an increase in the share price following the announcement by a company of a forthcoming bonus issue.Which of the following is a likely explanation of this phenomenon?

• A)Companies tend to increase their total dividend payout following a bonus issue.
• B)Bonus issues create wealth for shareholders.
• C)Bonus issues reduce the debt/equity ratio and,therefore,the riskiness of the firm.
• D)Bonus issues increase the dividend payout ratio of companies.

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Definitions:

Genetically Determined

Traits or characteristics that are directly influenced by an individual's genetic makeup.

Genetic-Environment Correlation

The concept that exposure to environmental conditions depends in part on an individual's genotype, influencing their development and traits.

Sperm Cell

A male reproductive cell or gamete involved in sexual reproduction, capable of fertilizing an ovum.

Ova

The female reproductive cells or eggs in animals and plants, which when fertilized by male sperm can develop into a new organism.