Which of the Following Statements Is Correct

question 23

Multiple Choice

Which of the following statements is correct?

• A) The optimal dividend policy is the one that satisfies the shareholders because they supply the firm's capital.
• B) The use of debt financing has no effect on earnings per share (EPS)or stock price.
• C) The riskiness of projected EPS depends upon how the firm is financed.
• D) Stock price is dependent on the projected EPS and the use of debt but not on the timing of the earnings stream.
• E) Dividend policy is one aspect of the firm's financial policy that is determined directly by the shareholders.

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Definitions:

Wartime Borrowing

The process of governments taking on debt during times of war to finance military operations and support the economy.

Social Security

A government program that provides financial assistance to retirees, disabled individuals, and their dependents.

Cyclically Balanced

A fiscal policy strategy where government budgets are planned to balance over the business cycle, running surpluses in boom years and deficits during recessions.