Which of the following statements is CORRECT?
Group of answer choices
One advantage of dividends over share repurchases is that dividends provide financial managers with more flexibility.
Despite several advantages of share repurchases, dividends remain the dominant form of shareholder payout.
After announcing a share repurchase program, a firm is not required to repurchase any of the shares it intended to buy back.
B and C are correct.
All of the above are correct.
ANS: Option (B) (Despite several advantages of share repurchases, dividends remain the dominant form of shareholder payout.)
Option A is Incorrect because Dividends are taxable income, whereas Buyback allows the entire distributed income to be re-invested with no tax levied. Thus, buyback also provides flexibility.
Option C is also incorrect as in share re-purchase program, companies buyback their own share at market price to retain their ownership.
Thus, Option B is correct as Dividend is the dominant form of shareholder payout. Dividend attacts the capital investment from the investors, reduces the portfolio risk, provides tax advantage etc. Futhermore, Dividends are the cash flow to the investors, Dividend is the reflection of well performance of company & builds a market reputation & helps to gain customer loyalty.
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