Asked by Sameer Ishaq on Apr 29, 2024
Verified
Flotation costs tends to keep dividends low.
Flotation Costs
Expenses incurred by a company in issuing new securities, including underwriting, legal, and registration fees.
Dividends Low
This term implies a situation where a company issues dividends at a lower rate or amount, possibly reflecting a strategy to reinvest earnings into the business or an indication of financial conservation.
- Recognize the role of flotation costs in shaping decisions about dividends.
Verified Answer
RR
Royal RookieMay 01, 2024
Final Answer :
True
Explanation :
Flotation costs, which are the costs associated with issuing new securities, can reduce the amount of capital raised, leading companies to retain earnings to finance new projects instead of paying them out as dividends, thus keeping dividends low.
Learning Objectives
- Recognize the role of flotation costs in shaping decisions about dividends.