Which of the Following Statements About Dividend Policies Is Correct

question 46

Multiple Choice

Which of the following statements about dividend policies is correct?

• A) one reason that companies tend to avoid stock repurchases is that dividend payments are taxed at a lower rate than gains on stock repurchases.
• B) one advantage of dividend reinvestment plans is that they allow shareholders to avoid paying taxes on the dividends that they choose to reinvest.
• C) one key advantage of a residual dividend policy is that it enables a company to follow a stable dividend policy.
• D) the clientele effect suggests that companies should follow a stable dividend policy.
• E) modigliani and miller argue that investors prefer dividends to capital gains because dividends are more certain than capital gains. they call this the "bird-in-the hand" effect.

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Definitions:

Forthcoming Contribution

Expected or promised financial donations or investments that are pledged to be given at a future date.

Cash Account

A type of account where all transactions involve the immediate payment of cash.

Partnership Loan

A type of financing where a lender provides funds to a partnership, which is typically used for business operations or expansion.

Liquidation Expenses

Costs incurred during the winding up of a company, including legal fees, selling expenses, and other administrative expenses involved in liquidating the company's assets.