Which of the Following Is True of Arguments for Dividend

question 46

Multiple Choice

Which of the following is true of arguments for dividend relevance?

• A) A firm's value is determined solely by the earning power and risk of its assets.
• B) Investors are generally risk averse and attach less risk to current dividends than future dividends or capital gains.
• C) The value of a firm is unaffected as it functions in a perfect market.
• D) A clientele effect exists which causes a firm's shareholders to receive the dividends that they expect.

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Definitions:

Aging

The process of categorizing accounts receivable based on how long an invoice has been outstanding to determine credit risk.

Direct Write-Off Method

An accounting method used to recognize bad debts at the point when specific accounts are deemed uncollectible, directly impacting the income statement.

Allowance Method

An accounting technique used to manage accounts receivable and bad debt by estimating uncollectible accounts at the end of each period.

Write Off

The accounting action of recognizing that an asset has reduced in value and reporting its loss.