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Question
Explain the following factor affecting the dividend decision of a company:
Stock market reaction
Explain
Solution
The amount of dividend that a company distributes affects its stock market prices. A company's dividend increase is viewed as a good sign by the investors, and the company's stock price goes up. On the other hand, a fall in dividends adversely affects stock prices. Thus, a company must consider the probable stock market reactions while taking a dividend decision.
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2023-2024 (February) Delhi Set - 1