The maximum dividend method is
A) the cleanest for valuing assets, but creates problems valuing surplus cash
B) the cleanest for valuation purposes but its dividend-laden financial statements can dramatically understate the firm's cash position
C) the cleanest for cash planning, but creates problems valuing the venture by discounting the dividends
D) calculated by directly discounting the cash flow statement's projected dividend flow to investors, but ignores risks associated with periodic gluts of surplus cash

Question

Quizplus · Accepted Answer

The maximum dividend method focuses on distributing all available cash as dividends, which can make financial statements appear to understate the firm's cash position due to the high dividend payouts.

The Maximum Dividend Method Is