Question:
‘Dovex’ was a large company with a renowned name in healthcare industry, specializing in the development and production of life-saving medications and medical devices. With a strong reputation for ethical practices, ‘Dovex’ attracted a large number of investors who had great faith in the company’s future. This allowed ‘Dovex’ to raise capital easily from the market whenever expansion or new projects were to be undertaken. As a result, it could pay high dividends to the shareholders.
The factor affecting dividend decision discussed above, which allowed ‘Dovex’ to pay high dividends to the shareholders is:
‘Dovex’ was a large company with a renowned name in healthcare industry, specializing in the development and production of life-saving medications and medical devices. With a strong reputation for ethical practices, ‘Dovex’ attracted a large number of investors who had great faith in the company’s future. This allowed ‘Dovex’ to raise capital easily from the market whenever expansion or new projects were to be undertaken. As a result, it could pay high dividends to the shareholders.
The factor affecting dividend decision discussed above, which allowed ‘Dovex’ to pay high dividends to the shareholders is:
Updated On: Feb 19, 2025
- Cash flow position
- Stock market reaction
- Legal constraints
- Access to capital market
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The Correct Option is D
Solution and Explanation
Step 1: A company's ability to access capital from the market plays a crucial role in dividend decisions. If a company can raise funds easily, it has the flexibility to pay higher dividends.
Step 2: Since 'Dovex' had a strong reputation and could attract investors easily, it could afford to pay higher dividends without compromising its financial stability.
Thus, the correct answer is option D.
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