Financial Management II Model exam Questions

1. The difference between financial structure and capital structure is

A. Financial Structure measures total funds available to finance the total assets
B. Capital structure includes both long term and short term source of funds
C. Financial structure includes only long term sources of funds
D. Capital structure consists of all sources of capital including current liability
2. Enat Bank has Equity share capital = $1,000000, Preference share capital =500,000,Long
term debt (debenture) =$300,000,Interest payable=100,000, Fixed assets=$1,600,000 Cash
at bank=150,000 and Interest Receivable =$150,000.what is the capitalization of the Banks
A. $2,100,000 B. $1,900,000 C. $1,800,000 D. $2,000,000
3. Refer question number 2 and what is the amount of Capital structure and Financial
structure respectively
A. 1,800,000 and 1,900,000 C. 1,900,000 and 1,800,000
B. 1,900,000 and 2,000,000 D. 1700,000 and 1,900,000
4. _____ approach states that the mix of debt and equity capital can increase the value of the
firm by reducing overall cost of capital up to certain level of debt
A. Net Income theory C. Traditional theory
B. Net operating theory D. MM proposition I theory
5. A firm's cost of capital is:
A. The average cost of raising funds.
B. The key driver of the overall value of the firm.
C. Reflects the required rate of return of investors and lenders.
D. All of the above.
6. The financial planning process is the responsibility of
A. Financial analysts.
B. Operations staff.
C. Marketing staff
D. Financial analysts, marketing staff, and operations staff interacting as a group
7. What is the most important ingredient in developing a firm's financial plan?
A. A forecast of sales revenues
B. Determining the amount of dividends to pay shareholders
C. Projecting the rate of interest on proposed new debt
D. Deciding upon which method of depreciation a firm should utilize

8. Which of the following statements about the percent-of-sales method of financial

forecasting is true?
A. It is the least commonly used method of financial forecasting.
B. It is a much more precise method of financial forecasting than a cash budget would be.
C. It involves estimating the level of an expense, asset, or liability for a future period as a
percent of the forecast for sales revenues.
D. It projects all liabilities as a fixed percentage of sales
9. The first step involved in predicting financing needs is
A. Projecting the firm's sales revenues and expenses over the planning period.
B. Estimating the levels of investment in current and fixed assets that are necessary to
support the projected sales.
C. Determining the firm's financing needs throughout the planning period.
D. None of the above.
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10. Which of the following factors might cause the sales forecast for a brick and mortar
retailer to differ from the simple continuation of past trends?
A. The increasing popularity of internet shopping.
B. A sharp increase or decrease in employment rates.
C. A major competitor closes several nearby stores.
D. Any of the above
11. Which of the following are considered to be spontaneous sources of financing (i.e., they
arise naturally during the course of doing business)?
A. Notes payable and common stock
B. Accounts receivable and bonds
C. Fixed assets and inventory
D. Accounts payable and accrued expenses
12. Which of the following describes the effect of a stock dividend?
A. A stock dividend immediately increases the market price of a share of stock.
B. A stock dividend immediately decreases the paid-in capital account.
C. A stock dividend immediately increases the number of shares outstanding.
D. A stock dividend indicates that the company must be short on cash.
13. Which of the following is the most likely reason for a corporation to cut its dividend?
A. To keep the firm's price within its optimal range.
B. Because the company believes that existing dividend levels are no longer sustainable.
C. To make the firm more attractive to growth oriented investors.
D. To shelter the shareholders from double taxation

14. Market values for equity are calculated as:

A. The sum of the value of equity and accumulated retained earnings as found on the
balance sheet.
B. The price per share multiplied by the number of shares outstanding.
C. The price per share multiplied by the number of shares outstanding plus the accumulated
retained earnings.
D. The price per share multiplied by the number of shares outstanding minus the
accumulated retained earnings.
15. ______ is the value that a business is worthy of at a particular date when one needs to pay
to buy/ take over a business entity.
A. Firm Value C. Stock value
B. Book values D. Par value
16. ________ refers to the difficulties experienced by firms as they attempt to meet financial
commitments to their creditors.
A. Financial distress C. Capital budgeting
B. Capital structure D. Working capital management
17. A firm's risk level will fluctuate as its ________ changes.
A. financial leverage C. degree of financial leverage
B. debt-to-equity D. All of the above.
18. Modigliani and Miller (M&M) Proposition II states:
A. The cost of equity does not change when a firm takes on a greater proportion of debt.
B. The cost of equity increases when a firm takes on a greater proportion of debt.
C. The cost of debt increases when a firm takes on a greater proportion of equity.
D. The cost of equity decreases when a firm takes on a greater proportion of
19. Which of the following is NOT one of M&M's perfect capital market assumptions?
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 A. No taxes
B. Individuals can borrow or lend at the same rate
C. Every party has equal access to information
D. Bankruptcy costs are reasonably low
20. PrintQuik Inc. has a cost of equity of 14% and a cost of debt of 6%. If the firm is financed
with 70% equity and 30% debt, and they operate under the conditions of a perfect capital
market, what is the firm's average cost of capital?
A. 9.80% B. 10.50% C. 11.60% D. 10.00%
21. The major real-world benefit of debt is that interest payments are:
A. Made after tax considerations.
B. A tax-deductible expense.
C. Always less than 10% of the firm's profit.
D. Smaller than the dividend payments.
22. Optimal capital structure, or debt capacity, is the debt-equity mix that:
A. Puts the firm at the EBIT-EPS breakeven point.
B. Maximizes shareholder control.
C. Minimizes the amount of debt held by the firm.
D. Maximizes the value of the firm's common equity
23. Which of these is not a part of Capital Structure?
A. Equity Shares C. Short-term borrowings
B. Debentures D. Bonds
24. Capital Structure is an optimal mix of which one of the following options:
A. Sales and profits C. Current assets and fixed assets
B. Debt and equity D. None of the above
25. According to Net Income Approach, capital structure decision
A. Is relevant to the value of the firm.
B. Is irrelevant. to the value of the firm
C. Will not lead to any change in the total value of the firm and the market price of shares.
D. Division between debt and equity is irrelevant.
26. Moon Ltd. earns 24% before interest and tax on its total assets of birr 5000,000. It is
unlevered company and has no debts in its capital structure. Tax rate is 40% and
capitalization rate is 18%. Calculate the value of the company using Net Income Approach.

A. 60,00,000
B. 40,00,000
C. 50,00,000
D. 55,00,000

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27. Financial Risk is
A. The equity risk that comes from the nature of the firm’s operating activity
B. The basic risk inherent in the operations of a firm
C. The risk arising due to the use of debt financing
D. The risk of not being able to pay dividends
28. One of the following is not correct about Static Trade off theory
A. Value of firm is maximized when tax shield-cost of financial distress is at a maximum
B. Value of livered firm is equal to unlevered firm
C. Value of livered firm =Value of unlevered + (tax *Debt)
D. A and C

29. Except one all are the critical assumption of Miller and Modigliani Approach

[A] Perfect capital market [C] There is fixed tax

[B] No risk or uncertainty [D] Investors are rational

30. One of the following is not true about Walter’s Model

[A] According to the model, dividend policy affects the value of the firm
[B] The Model state the relationship between internal rate of return and required rate of return
[C] If the return on investment exceeds the cost of capital the Firm should retain the earning
[D] If the internal rate of return exceeds the required rate of return the Firm should distribute the earning
31. In____ Dividend policy the dividends can only be paid out of what is left over after all investment needs
are satisfied

[A] Regular dividend policy [C] Residual dividend policy

[B] Irregular dividend policy [D] Constant pay-out policy

32. The dividend-payout ratio is computed as:

[A] The dividend yield plus the capital gains yield.
[B] Dividends per share divided by par value per share.
[C] Dividends per share divided by earnings per share.
[D] Dividends per share divided by current price per share.
33. A payment of additional shares to shareholders instead of cash dividend.
[A] Stock split [C] Regular dividend
[B] Extra dividend [D] Stock dividend
34. Which one of the following is the assumption of Gordon’s Model?
[A] Firm is an all equity firm. [C] Retention ratio (b) is constant.
[B] Ke > g [D] All of the above.
35. Which of the following is not a dividend relevance theory?
[A] M.M approach. [C] Gorden Model.
[B] Walter Model. [D] Bird in the hand theory.
36. A firm purchased raw materials on account and paid for them within 60 days. The raw materials were used
in manufacturing finished goods sold on account 100 days after the raw materials were purchased. The
customer paid for the finished good 30 days later. The firm’s cash conversion cycle is _________ days.

[A] 10 [B] 70 [C] 130 [D] 190

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37. What is the inventory period for a firm with an annual cost of goods sold of $8 million, $1.5 million in
average inventory, and a cash conversion cycle of 75 days? Use 365 days year.

[A] 6.56 days [B] 18.75 days [C] 53.33 days [D] 68.44 days

38. A firm has annual operating outlays of $1,800,000 and a cash conversion cycle of 60 days. If the firm
currently pays 12% interest for negotiated financing and reduces its cash conversion cycle to 50 days, the
annual savings is

[A] $50,000 [B] $200,000 [C] $ 6,000. [D] $216,000.

39. For the ABC Company net income was $50,000, total assets were $500,000 and equity was $ 250,000. of
the $50,000 net income 40% was retained what is the internal growth rate

[A] 4.17% [B] 8.7% [C] 6.4% [D] 13.64%

40. The credit applicant’s _________ is the financial strength of the applicant as reflected by its ownership
position.

[A] Character [C] Capital

[B] Capacity [D] Collateral

41. As credit standards are relaxed, sales are expected to _________ and the investment in accounts receivable
is expected to _________.

[A] increase; increase [C] decrease; decrease

[B] increase; decrease [D] decrease; increase

42. A certain type of computer costs (P) $1,000, and the annual holding cost is 25%. Annual demand is 10,000
units, and the order cost is $150 per order. What is the approximate economic order quantity?

[A] 16 [B] 70 [C] 110 [D] 183 [E] 600

43. In which financing strategies for working capital, the firm is financing its fixed /permanent working capital
and also a part of its fluctuating working capital with long-term financing.

[A] Matching/ Hedging approach [C] Aggressive approach

[B] Conservative approach [D] Cost Benefit Approach

44. Capital Costs is

[A] Interest cost [C] collection cost
[B] Administration cost [D] All of the above
45. Default cost as cost of receivable means
[A] Salaries to the staff kept for maintaining accounting records relating to customers.
[B] Cost of conducting investigations regarding potential credit customers to determine their credit
worthiness.
[C] Firm may not be able to recover the over dues because of the inability of the customers.
[D] A firm costs incur for collecting the payments from its credit customers.
46. Which is/are not the result of strict credit policy
[A] Firm’s save from bad debit loss
[B] It increases firm’s collection cost
[C] It reduces firm’s investment in receivables

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 [D] It depressing firm’s sales volume
47. One is the maximum growth rate a firm can achieve with no external equity financing while it maintains a
constant debt–equity ratio:
[A] Internal growth rate [C] External growth rate
[B] Sustainable growth rate [D] Constant growth rate

Use the following information for answering the next 3 questions

X Company’s has outstanding 2000 common shares selling at $1000 and the Firm’s declared dividend of
$100 per share at the end of the current year. The Company expects to have a net income of $500,000 and a
proposal for making new investment of $800,000.
48. Required the market price of each share using MM approach if the company’s not paid the dividend and the
appropriate capitalization rate is 10%

[A] 1100 [B] 110 [C] 100 [D] 1000

49. what is the number of new share issued to cover the new investment

[A] 454.55 [B] 300 [C] 272.73 [D] 500

50. what is the value of the firm

[A] 300,003 [B] 2,500,003 [C] 272,730 [D] 2,272,730

51. During sales forecast what factors must considered

[A] The historical sales growth pattern of the firm
[B] The level of economic activity in each of the firm’s marketing areas
[C] The effect of inflation on the firm’s future pricing of products
[D] All of the above
52. What is the correct order in the forecast of firm’s Balance Sheet
1. The spontaneously increasing liabilities are forecasted.
2. The liability and equity items that are not directly affected by sales are set.
3. Those balance sheet items that are expected to increase directly with sales are forecasted
4. The Additional Fund needs will be raised
5. The value of retained earnings for the forecasted period is obtained
[A] 2, 1,4,3,5 [C] 3,2,1,5,4
[B] 3,1,2,5,4 [D] 2,1,3,4,5
53. ___________ is funds that are obtained from routine business transactions
[A] Internally Generated funds [C] External Generated funds
[B] Spontaneous Generated funds [D] Additional fund
54. The time interval between paying for raw materials and collecting on sales of finished goods is known as
the:
[A] Inventory cycle [C] Cash conversion cycle
[B] Matching cycle [D] Accounts receivable cycle
55. What is the cash conversion cycle for a firm with a receivables period of 40 days, a payables period of 30
days, and an inventory period of 60 days?
[A] 10 days [B] 50 days [C] 70 days [D] 130 days

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56. A firm's inventory and accounts payable periods are 80 and 42 days respectively. How long can the firm's
receivables period be in order to have no longer than a 65 day cash conversion cycle?
[A] 27 days [B] 38 days [C] 57 days [D] 103 days
57. Which of the following would not be included among the costs of carrying inventory?
[A] Obsolescence [C] Raw material cost
[B] Opportunity cost of capital [D] Risk of theft
58. A firm has an Operating cycle of 170 days, an average payment period of 50 days, and an average age of
inventory of 145 days. The firm’s average collection period is _________ days.
[A] 25 [B] 75 [C] 95 [D] 120
59. A firm’s inventory is ETB 10,000, receivables amount to ETB 23,000, cash is ETB 3,000 and current
liabilities ETB 7,000. The Gross Working Capital and Net Working Capital of the firm respectively are:
where GWC = Gross Working Capital, NWC = Net Working Capital
[A] GWC 23,000 and NWC 16,000 [C] GWC 33,000 and NWC 23,000
[B] GWC 43,000 and NWC 36,000 [D] GWC 36,000 and NWC 29,000
60. The cash conversion cycle can be shortened by
[A] Reducing the inventory conversion period
[B] Lengthening the receivables collection period
[C] Reducing the payables deferral period
[D] All
61. One of the following is the motives that emphasizes the need to maintain inventories to facilitate smooth
production and sales operations
[A] Precautionary motive
[B] Transactions motive
[C] Speculative motive
[D] All of the above

62. Based on the following data, answer the following 4 questions. ZEMENAY Company reported the
following data for 2022:
Net Profit Margin 10%
Total Asset Turnover 4
Total Debt Ratio 60%
Credit sales Birr 2,920,000
Average Accounts Receivable Birr 160,000
Cost of Goods Sold Rate 40%
Day’s sales in inventory 15 days
63. What is the return on asset (ROA)?

[A] 24% [B] 40% [C] 60% [D] 120%

64. What is the return on equity (ROE)?
[A] 100% [B] 80% [C] 120% [D] 150%
65. What is the average collection period for credit sales?

[A] 30 days [B] 45 days [C] C. 20 days [D] 25 days

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66. What is the average inventory of the year 2022?
[A] Birr 48,000 [C] Birr 96,000
[B] Birr 72,000 [D] Birr ` 100,000
67. The proposition that the cost of equity is a positive linear function of capital structure is called:
[A] The capital asset pricing model.
[B] MM Proposition I.
[C] MM Proposition II.
[D] The efficient markets hypothesis
68. The reason that MM Proposition I does not hold in the presence of corporate taxation is because:
[A] Levered firms pay less tax compared with identical unlevered firms.
[B] Bondholders require higher rates of return compared with stockholders.
[C] Earnings per share are no longer relevant with taxes.
[D] Dividends are no longer relevant with taxes.
69. Thompson & Thomson is an all equity firm that has 500,000 shares of stock outstanding. The company is in
the process of borrowing $8 million at 9% interest to repurchase 200,000 shares of the outstanding stock.
What is the value of this firm if you ignore taxes?
A. $20.0 million C. $21.0 million
B. $20.8 million D. $21.2 million
70. Your firm has a debt-equity ratio of 0.75. Your pre-tax cost of debt is 8.5% and your required return on
assets is 15%. What is your cost of equity if you ignore taxes?
[A] 11.25% [B] 12.21% [C] 16.67% [D] 19.88%
71. If EOQ = 360 units, order costs are $5 per order, and carrying costs are $0.20 per unit, what is the usage in
units?
[A] 129,600 units [C] 25,920 units
[B] 2,592 units [D] 18,720 units
72. The “bird-in-the-hand” dividend theory suggests that
[A] high dividends increase stock value because shareholders believe they can earn a higher return than the
company
[B] high dividends increase stock value because shareholders are more certain of the dividend yield than of
potential future capital gains
[C] high dividends increase stock value because capital markets are inefficient, and dividends are the only
sure way to get money from an equity investment
[D] high dividends decrease stock value because dividend payments take money out of the corporate
“nest” and reduce the ability of the corporation to function effectively
73. Which of the following can achieve through an efficient inventory management
[A] Ensure a continuous supply of materials to facilitate un-interrupted production.
[B] Minimize the carrying cost of inventories.
[C] Control investments in inventories and maintain optimum level
[D] All of the above
74. Samuel, Inc. reported net income for 2011 is $105,000.During 2011 the Company had 5000 shares of $100
par, 5% preferred stock and 20000 of $5 par common stock outstanding. Samuel’s earnings per share for
2011 is
[A] $4 [B] $5.25 [C] $6.5 [D] $5
75. The value of a firm is maximized when the:
[A] Cost of equity is maximized

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 [B] Tax rate is zero
[C] Levered cost of capital is maximized
[D] Weighted average cost of capital is minimized
76. Which of the following best defines operating leverage?

A. The degree to which a company uses debt financing

B. The degree to which a company's costs are fixed versus variable
C. The degree to which a company is exposed to changes in interest rates
D. The degree to which a company is exposed to changes in exchange rates
77. Which of the following is a way to increase operating leverage?
A. Increasing the company's variable costs
B. Increasing the company's fixed costs
C. Reducing the company's sales volume
D. Reducing the company's revenue

78. Which of the following is true of high operating leverage?

A. It increases a company's risk of bankruptcy
B. It reduces a company's risk of bankruptcy
C. It has no effect on a company's risk of bankruptcy
D. It increases a company's liquidity

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79. Which of the following best defines financial risk?
A. The risk associated with a company's operations and the industry it operates in
B. The risk associated with a company's financial structure and financing decisions
C. The risk associated with changes in interest rates and exchange rates
D. The risk associated with changes in consumer demand and competition
80. Which of the following best defines financial leverage?
A. The degree to which a company uses debt financing
B. The degree to which a company's costs are fixed versus variable
C. The degree to which a company is exposed to changes in interest rates
D. The degree to which a company is exposed to changes in exchange rates
81. Which of the following is a way to reduce financial risk?
A. Increasing the company's debt-to-equity ratio
B. Diversifying the company's product line
C. Investing in riskier assets
D. Reducing the company's liquidity
82. Which of the following is a way to increase financial leverage?
A. Reducing the company's debt-to-equity ratio
B. Increasing the company's variable costs
C. Increasing the company's fixed costs
D. Reducing the company's sales volume
83. Which of the following is true of high financial leverage?
A. It increases a company's risk of bankruptcy
B. It reduces a company's risk of bankruptcy
C. It has no effect on a company's risk of bankruptcy
D. It increases a company's liquidity
84. Which of the following best defines the optimal capital structure?
A. The capital structure that maximizes the company's profitability
B. The capital structure that minimizes the company's risk
C. The capital structure that balances the company's risk and profitability
D. The capital structure that maximizes the company's liquidity
85. Which of the following is a factor that affects a company's optimal capital structure?
A. Market conditions
B. Company size
C. Industry risk
D. All of the above
86. Which of the following is a way to determine the optimal capital structure?
A. Analyzing the company's financial statements
 B. Conducting a cost of capital analysis
C. Comparing the company's capital structure to industry peers
D. All of the above
87. Which of the following is a benefit of using more debt financing?
A. Lower financial risk
B. Higher profitability
C. Lower cost of capital
D. Higher liquidity
88. Which of the following is a drawback of using more debt financing?
A. Higher financial risk
B. Lower profitability
C. Higher cost of capital
D. Lower liquidity
89. Which of the following is not one of the assumptions made by Modigliani and Miller in their
capital structure irrelevance theory?
A. Investors have access to the same information
B. There are no taxes
C. There are no transaction costs
D. The firm's earnings are constant
90. According to Modigliani and Miller, which of the following statements is true regarding the
cost of equity?
A. It increases as the amount of debt in the firm's capital structure increases
B. It is unaffected by changes in the firm's capital structure
C. It decreases as the amount of debt in the firm's capital structure increases
D. It is always higher than the cost of debt

91. If a firm's cost of debt is 8% and its cost of equity is 12%, what is the weighted average cost of
capital (WACC) according to Modigliani and Miller's capital structure irrelevance theory if the
firm's capital structure is 100% equity?

A. 8% B. 10% C. 12% D. 14%

92. Which of the following statements is true regarding Modigliani and Miller's capital structure
irrelevance theory?
A. The value of a firm is not affected by its capital structure
B. The cost of equity is always higher than the cost of debt
C. The optimal capital structure is one that maximizes the value of the firm
D. The cost of capital is always equal to the cost of equity
93. Which of the following criticisms of Modigliani and Miller's capital structure irrelevance
theory is most valid?
A. It assumes that investors have access to the same information
B. It does not take into account the impact of taxes
C. It assumes that the firm's earnings are constant
D. It ignores the impact of market imperfections on the firm's cost of capital
94. Which of the following best describes M&M Proposition I with taxes?
A. The total market value of a firm is independent of its capital structure.
B. The cost of equity is directly proportional to the firm's debt-to-equity ratio.
C. The value of a firm is maximized when it uses 100% debt financing.
D. The cost of capital is equal to the weighted average cost of debt and equity.
95. Which of the following statements is true regarding M&M Proposition II with taxes?
A. The cost of equity increases as the firm's debt-to-equity ratio increases.
B. The value of a firm increases as the firm's debt-to-equity ratio increases.
C. The cost of debt decreases as the firm's debt-to-equity ratio increases.
D. The value of a firm is independent of its capital structure.
96. If a firm has a tax rate of 30%, what is the after-tax cost of debt if the before-tax cost of debt is
8%?

A. 5.6% B. 8% C. 11.2% D. 30%

97. Which of the following factors could cause M&M Proposition I with taxes to not hold true?
A. Corporate tax rates are zero.
B. Bankruptcy costs are high.
C. Investors are indifferent between debt and equity.
D. The cost of equity is higher than the cost of debt.
98. A firm is considering two different capital structures: one with 60% debt and one with 40%
debt. Which capital structure should the firm choose according to M&M Proposition I with
taxes?
A. The 60% debt structure
B. The 40% debt structure
C. There is not enough information to determine which structure is better.
D. The firm should use 100% debt financing.
99. Which of the following dividend theories suggests that investors prefer higher dividends over
lower dividends?
A. Bird-in-hand theory
B. Tax preference theory
C. Residual theory
D. Modigliani-Miller theory
100. Which of the following dividend theories suggests that companies should only pay
dividends when they have excess cash?
A. Bird-in-hand theory
B. Tax preference theory
C. Residual theory
D. Modigliani-Miller theory
101. A company has a large amount of profitable investment opportunities. According to the
_____ theory of dividends, the company should reinvest its earnings rather than pay dividends.
A. Bird-in-hand theory
B. Tax preference theory
C. Residual theory
D. Modigliani-Miller theory
102. Using the dividend discount model, which of the following factors has the greatest impact on
the value of a company's stock?
A. The current dividend payment
B. The expected future dividend payments
C. The company's risk level
D. The current stock price
103.Which of the following dividend policies is most appropriate for a company that has a stable
earnings stream and a large number of conservative investors?
A. High dividend payout ratio
B. Low dividend payout ratio
C. No dividend payout
D. Irregular dividend payout ratio
104. Which of the following is NOT a type of dividend policy?
A. Stable dividend policy
B. Residual dividend policy
C. Target payout ratio policy
D. Debt-to-equity ratio policy
105. What is the difference between a stable dividend policy and a residual dividend policy?
A. A stable dividend policy maintains a consistent dividend payout, while a residual dividend
policy pays out dividends only after all other expenses are covered.
B. A stable dividend policy pays out dividends only after all other expenses are covered, while
a residual dividend policy maintains a consistent dividend payout.
C. A stable dividend policy pays out dividends based on a target payout ratio, while a residual
dividend policy pays out dividends based on the availability of funds.
D. A stable dividend policy pays out dividends based on the availability of funds, while a
residual dividend policy pays out dividends based on a target payout ratio.
106. If a company has a target payout ratio of 40% and earnings per share of $2, how much will
it pay in dividends per share?

A. $0.40 B. $0.80 C. $1.20 D. $1.60

107. What are the advantages and disadvantages of a high dividend payout ratio?
A. Advantages: attracts investors, signals confidence in the company;
Disadvantages: limits reinvestment opportunities, may signal lack of growth opportunities.
B. Advantages: allows for reinvestment opportunities, signals confidence in the company;
Disadvantages: may not attract investors, may signal lack of growth opportunities.
C. Advantages: may attract investors, allows for reinvestment opportunities; Disadvantages:
signals lack of confidence in the company, limits growth opportunities.
D. Advantages: signals confidence in the company, allows for growth opportunities;
Disadvantages: may not attract investors, limits reinvestment opportunities.