Which of the following situations is a potential source of cash flows for a shareholder of a certain stock? I.The investor may be able to sell the shares at a future date.
II)The firm in which the shares are held might pay out cash to shareholders in the form of dividends.
III)The firm in which the shares are held might increase the value of its shares by reducing the total number of shares outstanding.

Question

Quizplus · Accepted Answer

Option I is correct as the investor can potentially sell their shares at a higher price than the purchase price in the future, thereby generating cash flows. 
Option II is also correct as the firm may distribute cash to its shareholders in the form of dividends. 
Option III is incorrect as reducing the total number of shares outstanding does not generate cash flows for shareholders.

Which of the Following Situations Is a Potential Source of Cash