Question

‘Tangy Beverages Ltd.’ was known for its popular tangy fruit drinks. It had recently introduced a new range of fruit drinks that became an instant hit among consumers and led to a significant increase in the company’s profits. As a result, the Board of Directors wanted to declare a higher dividend for the year. The Chief Finance Officer suggested that they should evaluate the impact of dividend on the share price of previous years before taking a decision. An analysis was done, which showed how the company’s share price had risen in previous years whenever the dividend was increased. On the other hand, even a small decrease in dividend had led to a noticeable dip in the share price. Which of the following factors affecting dividend decision was suggested by the Chief Finance Officer to the Board of Directors in the above case ?

• A. Access to capital market
• B. Stock market reaction
• C. Shareholders preference
• D. Cash flow position

Hint:

If the case study mentions "Share Prices," "BSE/NSE," or "Market Value of Shares," the factor being discussed is almost always Stock Market Reaction.

Answer 1

The Correct Option is B