Which of the Following Statements Is Correct

question 77

Multiple Choice

Which of the following statements is correct?

• A) In a reverse split,a company reduces the number of shares outstanding in order to stabilize and provide a floor for a rapidly declining stock price.
• B) In theory,dividends are determined as a residual item.Therefore,in order to conserve earnings for better future earnings opportunities,the poorer the firm's investment opportunities,the lower its dividend payments should be.
• C) The farther to the right the IOS is the higher a firm's dividend payout ratio,other things held constant.
• D) Even if a stock split has no information content,and even if the dividend per share adjusted for the split does not increase,there can still be a real benefit (i.e. ,a higher value for shareholders)from such a split,but any such benefit is probably small.

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Definitions:

Total Liabilities

The sum of all financial obligations or debts a company owes, including both short-term and long-term liabilities.

Incurred Expense

Expenses that have been recognized in the accounting period in which they are incurred, regardless of when the payment is made.

Adjusting Process

An analysis and updating of the accounts when financial statements are prepared.

Revenue Recognition Principle

A concept of accounting that states that revenues are recorded when earned, which is when the services have been performed or products have been delivered to customers.