The Payment of Dividends May Indirectly Result in Closer Monitoring

question 89

Multiple Choice

The payment of dividends may indirectly result in closer monitoring of management's investment activities,thus increasing shareholder value by

• A) reducing agency costs.
• B) increasing information asymmetry.
• C) increasing a company's amount of free cash flow.
• D) reducing auditing fees.

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Definitions:

Journal

A formal accounting record in which transactions are logged before they are posted to ledger accounts, detailing the date, accounts impacted, and amounts involved in each transaction.

Accumulated Depreciation

The total amount of a tangible asset's cost that has been allocated as depreciation expense over its useful life, reducing its book value on the balance sheet.

Operating Expense

Expenses incurred from normal business operations, including salaries, rent, utilities, and equipment depreciation.

Net Loss

The situation where a company's expenses exceed its revenues during a specific period, leading to a negative bottom line.