Multiple Choice
Sinkmaster Corp.settled a large lawsuit that caused earnings to be negative for the quarter.This quarterly loss was the first in 22 years.In addition,the company has a record of 48 consecutive quarters of dividend payments.Which of the following is correct?
A) The company cannot pay dividends this quarter since the company had no earnings.
B) The company can use cash generated through prior retention of earnings, or borrowed funds to pay the dividend.
C) The company can omit the dividend; shareholders are always understanding about the riskiness of business.
D) The clientele effect says that investor choice of investment vehicle is independent of dividend policy and therefore the payment/omission of the dividend is immaterial.
Correct Answer:
Verified
Correct Answer:
Verified
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