Which of the Following Statements Is Correct

question 17

Multiple Choice

Which of the following statements is correct?

• A)Firms with a lot of good investment opportunities and a relatively small amount of cash tend to have above-average payout ratios.
• B)One advantage of the residual dividend policy is that it leads to a stable dividend payout, which investors like.
• C)An increase in the stock price when a company decreases its dividend is consistent with signalling theory as postulated by MM.
• D)Stock repurchases make the most sense at times when a company believes its stock is undervalued.

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Definitions:

Sole Proprietorships

A type of business entity owned and operated by one individual, without any legal distinction between the owner and the business.

Partnerships

A legal form of business operation between two or more individuals who share management and profits.

Bankruptcy Filing

The legal process undertaken by individuals or businesses that cannot meet their financial obligations, to seek relief from some or all of their debts.

Creditors

Individuals or institutions that lend money or extend credit, expecting repayment in the future under agreed terms.