A justification for no dividend payments that would be pleasing to shareholders could be
A) insufficient cash available for dividend payments.
B) positive NPV investment projects that require the firm to retain cash for investment purposes.
C) an investor clientele that prefers current liquidity.
D) cash will be used for a stock dividend.

Question

Quizplus · Accepted Answer

Shareholders may be pleased to hear that the company is retaining cash for positive NPV investment projects, which will ultimately benefit the long-term value of their investment. This demonstrates a strategic use of capital and a focus on growing the business, rather than simply distributing cash to shareholders. Option A may be concerning to shareholders as it indicates a lack of financial stability, while option C relates more to the preference of individual investors rather than the overall strategy of the company. Option D, a stock dividend, may not be as well-received as a traditional cash dividend.

A Justification for No Dividend Payments That Would Be Pleasing