Which of the Following Statements Is Not Considered a Potential

question 81

Multiple Choice

Which of the following statements is not considered a potential answer to the dividend puzzle (why do corporations pay dividends) ?

• A) Paying dividends avoids the double taxation of corporate income
• B) Demanding that managers pay out dividends restricts their investment activities and forces them to adopt more efficient investment policies
• C) Paying dividends is a source of investor goodwill
• D) Dividends are a signal to the capital markets about the health of a corporation's activities

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Definitions:

Cash Payment

A transfer of cash from one party to another, often as payment for goods or services.

Bond Discount Amortization

This is the process of gradually expensing the difference between a bond's face value and its purchase price over its life, reflecting an increase in the bond's book value.

Straight-Line Amortization

A method of uniformly reducing the book value of an intangible asset over its useful life.

Interest Expense

The expenditure faced by a company for financing through borrowed resources during a defined time.