Which of the following statement(s) is/are false? 1. Capital profits can never be distributed as dividends to the shareholders. 2. Dividends are paid out of profits and, therefore, do not affect the liquidity position of the firm. 3. Every company should follow the policy of low dividend payment. 4. Walter’s model suggests that dividend payment dose not affect the market price of the share. Choose the correct answer

The correct answer is: C. 2, 3 and 4

• 2. Dividends are paid out of profits and, therefore, do not affect the liquidity position of the firm.

This statement is false because dividends are paid out of retained earnings, which are a part of the firm’s equity. Retained earnings are a source of liquidity for the firm, and paying dividends reduces the firm’s liquidity.

• 3. Every company should follow the policy of low dividend payment.

This statement is also false because the dividend policy of a firm should be based on the firm’s investment opportunities, its capital structure, and its tax situation. There is no one-size-fits-all dividend policy that is appropriate for all firms.

• 4. Walter’s model suggests that dividend payment dose not affect the market price of the share.

This statement is also false because Walter’s model suggests that the market price of a share is determined by the present value of its future dividends. Therefore, dividend payments do affect the market price of a share.

In conclusion, statements 2, 3, and 4 are false.