Which of the following statements is correct?

Question

Quizplus · Accepted Answer

The riskiness of projected EPS depends upon how the firm is financed, as the use of debt financing can increase the firm's financial risk and affect its ability to meet its financial obligations, leading to fluctuations in EPS. A is incorrect because the optimal dividend policy should balance the interests of both shareholders and the company's financial needs. B is incorrect as the use of debt financing can affect EPS and share price by increasing financial leverage. D is incorrect as the timing of earnings can also affect share price, such as if the earnings are expected to grow in the future or if they are subject to fluctuations. E is incorrect as dividend policy is ultimately determined by the company's board of directors, who must consider the interests of shareholders but also other factors such as the company's financial objectives and capital needs.

Which of the Following Statements Is Correct