Which Circumstance Should NOT Influence a Firm's Dividend Policy Decision

question 6

Multiple Choice

Which circumstance should NOT influence a firm's dividend policy decision?

• A) the firm's ability to accelerate or delay investment projects
• B) a strong preference by most shareholders for current cash income versus capital gains
• C) Constraints imposed by the firm's bond indenture
• D) the fact that much of the firm's equipment has been leased, rather than bought and owned

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Definitions:

Purchase Price

The amount of money paid to buy a good, service, or asset. It encompasses all forms of considerations including cash, assets, assumed liabilities, and other financial terms involved in a transaction.

Common Stock

An equity security that represents ownership in a corporation, with rights to vote on corporate matters and receive dividends.

Par Common Stock

The nominal or face value assigned to a share of common stock as stated in the corporate charter, which has little relation to its market value.

Par Preferred Stock

A class of ownership in a corporation with a fixed dividend that is paid out before any dividends are paid to common stockholders.