Which of the Following Statements Is Correct

question 13

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:

Reorder Point

The inventory level at which an order should be placed to replenish stock before it runs out, based on lead time and demand.

Average Usage

The mean amount of a resource or service consumed over a specific period, used for planning and analysis purposes.

Safety Stock

Inventory kept on hand to protect against stockouts, typically to address unpredictable demand or uncertainties in the supply chain.

Lead Time

The total time it takes for a process to be completed from the moment it is initiated until its conclusion, often critical in supply chain management.