CapiCal Industries Inc. is hoping to sell its upcoming share issue to its current investor base which includes funds that generate income and those whose income is derived from dividends. In determining a payout ratio that will suit its investors, what is CapiCal is considering?

Question

Quizplus · Accepted Answer

CapiCal is considering the Clientele Effect, which refers to the idea that a company's investor base is composed of specific types of investors who have certain preferences regarding financial policies such as payout ratios. By considering the preferences of its current investors, CapiCal can determine an appropriate payout ratio that will appeal to its investor base and potentially attract new investors with similar preferences. The Priority Segment, Agency Target, Key Stakeholders, and Investor Impact are not relevant concepts in this context.