Which of the following statements is CORRECT?

Question

Quizplus · Accepted Answer

DA) The residual dividend policy implies that dividends are paid from the leftover or residual earnings after all profitable projects have been financed. Therefore, if there's an increase in profitable projects, the firm will use more of its earnings to invest in these projects, leaving less for dividends, which could lead to a reduction in the dividend payout.D) New-stock dividend reinvestment plans (DRIPs) allow shareholders to use their dividends to purchase new shares of the company's stock, often at a discount and without brokerage fees. This increases the number of shares outstanding, similar to stock dividends. However, because the dividends are used to purchase new shares, the company's total book equity remains unchanged, as the cash paid out as dividends is converted into equity through the issuance of new shares.

Which of the Following Statements Is CORRECT