Which of the following statements is not considered a potential answer to the question of why corporations pay dividends?
A) Paying dividends avoids the double taxation of corporate income.
B) Demanding that managers pay out dividends restricts their investment activities and forces them to adopt more efficient investment policies.
C) Paying dividends is a source of investor goodwill.
D) Dividends are a signal to the capital markets about the health of a corporation's activities.

Question

Quizplus · Accepted Answer

Paying dividends does not avoid the double taxation of corporate income; in fact, dividends are subject to double taxation, as they are taxed at both the corporate level and again at the shareholder level.

Which of the Following Statements Is Not Considered a Potential