Asked by Elena Franco on Apr 26, 2024
Verified
Given a compromise dividend policy, firms prefer selling new equity as frequently as possible.
Selling Equity
Entails a company offering a portion of its ownership to investors in exchange for capital.
Compromise Policy
A strategy that aims to find a middle ground among differing opinions or conditions in policy-making.
- Attain familiarity with the idea and results of a compromise dividend strategy.
Verified Answer
YZ
Yidan ZhangMay 02, 2024
Final Answer :
False
Explanation :
Firms typically prefer to avoid selling new equity frequently due to the high transaction costs and potential dilution of existing shareholders' equity. Instead, they may opt for debt financing or retained earnings to finance their operations or growth.
Learning Objectives
- Attain familiarity with the idea and results of a compromise dividend strategy.
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