Which of the Following Explanations Is Usually NOT a Possible

question 14

Multiple Choice

Which of the following explanations is usually NOT a possible benefit of dividends?

• A) Some investors prefer dividend-paying stocks and will be willing to pay a higher price for stocks with regular dividends.
• B) Paying out large regular dividends can force management to regularly raise more capital. The extra scrutiny involved in raising capital can increase the incentives of management to run the company efficiently.
• C) Dividends can be used to manage the capital structure of a company.
• D) Paying dividends reduces the probability that a firm will enter financial distress.

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Definitions:

Dwelling

A place where people live, such as a house or apartment.

Power

The ability or capacity to influence or control the behavior of others or the course of events.

Authority

The authority or capability to issue commands, make choices, and ensure compliance.

Hutterites

Members of a communal Anabaptist sect living primarily in the United States and Canada, known for their collective lifestyle and self-sufficiency.