Asked by Carter Brown on Jul 17, 2024
Verified
All else constant, the cash flow to stockholders:
A) Decreases when the dividends per share are decreased.
B) Remains unchanged when the firm repurchases shares of outstanding stock.
C) Decreases when a firm decreases its degree of financial leverage.
D) Decreases when the cash flow from assets increases.
E) Decreases as the common stock account balance decreases.
Dividends Per Share
The total amount of dividends declared by a company for each share of its stock, indicating the income investors receive from holding shares in the company.
Financial Leverage
The use of borrowed funds to increase one's investment potential, which can magnify both gains and losses.
- Analyze the impact of dividend changes on cash flow to stockholders.
Verified Answer
SB
Shankeria BishopJul 24, 2024
Final Answer :
A
Explanation :
Cash flow to stockholders decreases when the dividends per share are decreased because the dividends represent the direct cash payments made to the stockholders. Reducing these payments directly reduces the cash flow to them.
Learning Objectives
- Analyze the impact of dividend changes on cash flow to stockholders.
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