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Match the items of List – I with the items of List – II. List-IList-II (a) Optimum dividend policy (i)…

An Optimum dividend policy balances current dividends and future growth to maximize stock price (a-i); a Stock split increases the number of shares outstanding by reducing…

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Match the items of List – I with the items of List – II.

List-IList-II
(a) Optimum dividend policy(i) strikes a balance between current dividends and future growth so as to maximise the stock price.
(b) Stock split(ii) a dividend paid in additional shares.
(c) Stock dividend(iii) increases the number of shares outstanding.
(d) Tax preference theory(iv) investors prefer to have companies retain earnings.
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Answer and explanation

Correct answer C

An Optimum dividend policy balances current dividends and future growth to maximize stock price (a-i); a Stock split increases the number of shares outstanding by reducing par value (b-iii); a Stock dividend is a dividend paid in additional shares (bonus shares) (c-ii); and the Tax preference theory holds that investors prefer companies to retain earnings for lower-taxed capital gains (d-iv), matching -(i), (b)-(iii), (c)-(ii), (d)-(iv).

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