Many Pundits Assumed Amazon Would Fail. Why

question 39

Multiple Choice

Many pundits assumed Amazon would fail. Why?

• A) the firm was losing money and competing against established, well known, offline brands who were going online.
• B) Amazon was too short-term focused.
• C) the firm was based in Seattle, rather than Silicon Valley.
• D) Amazon sales were not increasing.
• E) all of the above.

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Definitions:

Dividend Reinvestment Plans

Investment plans that allow shareholders to automatically reinvest their cash dividends in additional shares of the company's stock, usually without commission.

Strict Residual Dividend Policy

A dividend policy in which dividends are based on the earnings left over after all operating expenses, taxes, and project investments are covered.

Dividend Payout Ratio

The percentage of earnings paid to shareholders in dividends, calculated as dividends per share divided by earnings per share.

Clientele Effect

The attraction of companies with specific dividend policies to those investors whose needs are best served by those policies. Thus, companies with high dividends will have a clientele of investors with low marginal tax rates and strong desires for current income. Similarly, companies with low dividends will attract a clientele with little need for current income and who often have high marginal tax rates.