Which One of the Following Statements Is Correct

question 26

Multiple Choice

Which one of the following statements is correct?

• A)Generally speaking, the size of a firm has no effect on its tendency to pay dividends.
• B)The market crash and the accounting scandals in the early 2000s tended to cause financially stable firms to cease paying cash dividends.
• C)The majority of firms either started paying or increased their dividends per share in response to the May 2003 change in dividend taxation.
• D)Firms tend to prefer cash dividends over share repurchases for their flexibility and tax benefits.
• E)A non-dividend-paying firm is more apt to do a stock repurchase than to commence paying dividends.

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Definitions:

Lend Money

The action of giving money to someone with the expectation that it will be paid back in the future, possibly with interest.

Note

A written promise or obligation to pay a specified sum of money to a specified person at a specified time.

Secondary Liability

Secondary liability refers to a legal obligation that arises not from direct involvement in a wrongful act, but from a failure to properly oversee or control the primary party responsible, or from benefiting from the act.

Negotiable Instrument

An official paper that assures the delivery of a particular monetary amount, which can be demanded at any moment or at an agreed-upon time, identifying the person who will make the payment.