Which of the Following Statements Is CORRECT

question 59

Multiple Choice

Which of the following statements is CORRECT?

• A) Historically,the tax code has encouraged companies to pay dividends rather than retain earnings.
• B) If a company uses the residual dividend model to determine its dividend payments,dividend payout will tend to increase whenever its profitable investment opportunities increase relatively rapidly.
• C) The more a firm's management believes in the clientele effect,the more likely the firm is to adhere strictly to the residual dividend model.
• D) Large stock repurchases financed by debt tend to increase expected earnings per share,but they also tend to increase the firm's financial risk.
• E) A dollar paid out to repurchase stock has the same tax benefit as a dollar paid out in dividends.Thus,both companies and investors should be indifferent between distributing cash through dividends and stock repurchase programs.

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Definitions:

Process Division

The segmentation of a business or production process into distinct tasks or activities for efficiency and specialization.

Customer Order

A customer order is a request made by a customer to purchase goods or services from a business.

Customer Order Entry

The process through which customer orders are received, processed, and entered into a management system.

Retailer Allocation

The process of distributing goods from manufacturers to various retail outlets, ensuring an appropriate level of stock at different locations.