Which of the Following Statements Is Correct

question 51

Multiple Choice

Which of the following statements is correct?

• A) One nice feature of dividend reinvestment plans (DRIPs)is that they reduce the taxes investors would have to pay if they received cash dividends.
• B) Empirical research indicates that,in general,companies send a negative signal to the marketplace when they announce an increase in the dividend,and as a result share prices fall when dividend increases are announced.The reason is that investors interpret the increase as a signal that the firm has relatively few good investment opportunities.
• C) If a company wants to raise new equity capital rather steadily over time,a new stock dividend reinvestment plan would make sense.However,if the firm does not want or need new equity,then an open market purchase dividend reinvestment plan would probably make more sense.
• D) Dividend reinvestment plans have not caught on in most industries,and today about 99% of all companies with DRIPs are utilities.
• E) Under the tax laws as they existed in 2008,a dollar received for repurchased stock must be taxed at the same rate as a dollar received as dividends.

---

Definitions:

Cash Flow from Assets

The total amount of money being transferred in and out of a company from its operational activities, investment activities, and financing activities, specifically related to its assets.

Cash Flow from Assets

Represents the total amount of money being transferred in and out of a company's assets, encompassing operating, investing, and financing cash flows.

Operating Cash Flow

The cash generated by a company's normal business operations, indicating whether a company can generate enough positive cash flow to maintain and grow its operations.

Net Working Capital

The financial contrast between a company's short-term assets and its short-term obligations.