Which of the Following Statements Is Correct

question 23

Multiple Choice

Which of the following statements is correct?

• A) One advantage of the residual dividend policy is that it leads to a stable dividend payout, which investors like.
• B) An increase in the stock price when a company decreases its dividend is consistent with signaling theory as postulated by MM.
• C) If the "clientele effect" is correct, then for a company whose earnings fluctuate, a policy of paying a constant percentage of net income will probably maximize the stock price.
• D) Stock repurchases make the most sense at times when a company believes its stock is undervalued.
• E) Firms with a lot of good investment opportunities and a relatively small amount of cash tend to have above average payout ratios.

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Definitions:

Gross Revenue

The total income generated by a business before any deductions are made for expenses.

Big-Name Stars

Prominent and well-recognized celebrities or personalities, particularly in entertainment, who can significantly influence projects.

Game Winnings

The total amount of money or prizes one receives as a result of winning in games or competitions.

Years Of Education

Refers to the total number of completed years of schooling and advanced training.