Question

please tell me why my answer is not correct！ ty

Jestion 33 0 out of 0.3 points A successful profitable company, issuing dividends and instituting share buybacks, will most likely lower it stock price (per share) and thus devalue of its stock. Selected Answer: True Answers: True False

Answer 1

Solution:)

Dividend is the share of the profit which a company pays to its shareholders and the share price of the company discounts the future cash flows of the company and hence reflects the investors sentiment.

A profitable company paying dividends would not like to devalue or decrease its stock price as analysts evaluate the stock prices trajectory to gauge its health. They rely on earnings histories and P/E ratios i.e. the company's share price reflects the earnings of the company and if the company devalues its share price it would put the analysts on the back foot and would give a false impression about the same.