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 true because shareholders can sell their shares and receive cash in return. Option II is accurate because a company may decide to pay dividends to its shareholders in the form of cash payments. Option III is valid because a corporation can raise the value of its outstanding shares by reducing their total number, making each share more valuable. Therefore, options I and II are correct, but option III is incorrect. As a result, option C is the correct answer.

Which of the Following Situations Is a Potential Source of Cash