Which of the following statements are correct?

(A) Dividend payout ratio refers to the portion of total earnings distributed among equity shareholders

(B) "Bird in Hand" argument is given by Gordon's Model.

(C) MM model suggests that dividend payment is very relevant for the firm's value.

(D) Walter’s Model suggests that dividend payment does not affect the market price of the share.

Choose the correct option from those below:​

Correct option is A

· Statement (A) is correct:
· The dividend payout ratio represents the portion of a company’s earnings paid out as dividends to shareholders.
· Formula:

· Statement (B) is correct:
Gordon’s Model (Bird in Hand Theory) states that investors prefer dividends over capital gains because dividends are less risky.
Information Booster
· MM Model (Modigliani & Miller):
· Suggests that dividends do not impact a firm's value.
· Assumes perfect capital markets.
· Walter’s Model:
· Suggests that dividend policy is important for valuation.
Additional Knowledge
· Why are (C) and (D) incorrect?
· (C) is incorrect: MM model states that dividends are irrelevant to firm valuation.
· (D) is incorrect: Walter’s Model supports dividend relevance, stating that dividend policy impacts market price.