Which of the Following Statements Is Correct

question 30

Multiple Choice

Which of the following statements is correct?

• A) One advantage of dividend reinvestment plans is that they enable investors to avoid paying taxes on the dividends they receive.
• B) If a company has an established clientele of investors who prefer a high dividend payout, and if management wants to keep stockholders happy, it should NOT follow the strict residual dividend policy.
• C) If a firm follows a strict residual dividend policy, then, holding all else constant, its dividend payout ratio will tend to rise whenever the firm's investment opportunities improve.
• D) Despite its drawbacks, following the residual dividend policy will tend to stabilize actual cash dividends, and this will make it easier for firms to attract a clientele that prefers high dividends, such as retirees.

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Definitions:

Known Facts

Information or data that are confirmed to be true through evidence or acknowledgment.

Mathematical Calculations

The process of using mathematical methods and algorithms to compute numerical data and solve mathematical problems.

Consequential Damages

Indirect and unforeseen damages resulting from a party's actions, not from the direct act but from the result of the act.

Special Damages

Compensatory damages awarded in a lawsuit for specific financial losses directly caused by the defendant's actions.