The Residual Theory of Dividends Suggests That ________

question 118

Multiple Choice

The residual theory of dividends suggests that ________.

• A) different payout policies attract different types of investors but still do not change the value of a firm
• B) dividends are irrelevant in determining the value of a firm
• C) as long as a firm's equity need exceeds the amount of retained earnings, no cash dividend is paid
• D) the payout policies of different firms have no impact on the taxes that investors have to pay

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Definitions:

Promotional Activities

Marketing efforts designed to communicate the value of a product or service to customers to boost sales.

Free Ride

The act of benefiting from a resource, good, or service without contributing to the cost or effort involved in its provision.

Reap Benefits

To receive or gain advantages, improvements, or positive outcomes as a result of actions taken or efforts made.

Customer Interest

The level of curiosity or concern that prospective buyers show towards a product or service, often a critical factor in marketing and sales strategies.