Question 1

The problem with the residual dividend policy ratio is:

Accepted Answer

A) investors might come to expect a specified amount. 
B) the dollar amount of the dividend fluctuates from year to year. 
C) management is reluctant to cut the dividend even if there are low profits in a year. 
D) all of the above are possible problems. 
A) investors might come to expect a specified amount. 
B) the dollar amount of the dividend fluctuates from year to year. 
C) management is reluctant to cut the dividend even if there are low profits in a year. 
D) all of the above are possible problems. B

Question 2

The dividend policy that states smoothing of the dividend stream in order to minimize the effect of company reversals is called the:

Accepted Answer

A) increasing-stream hypothesis of dividend policy. 
B) stable dividend policy. 
C) clientele effect policy. 
D) residual payout policy. 
A) increasing-stream hypothesis of dividend policy. 
B) stable dividend policy. 
C) clientele effect policy. 
D) residual payout policy. B

Question 3

Which of the following is most likely to have a negative impact on stock price?

Accepted Answer

A) Omitting a stock repurchase offer 
B) Failure to increase the dividend at the same rate as previous years 
C) Cutting the dividend per share in dollar terms 
D) Reducing the dividend payout ratio 
A) Omitting a stock repurchase offer 
B) Failure to increase the dividend at the same rate as previous years 
C) Cutting the dividend per share in dollar terms 
D) Reducing the dividend payout ratio C

Question 4

All of the following are methods available to a corporation who desires to repurchase stock EXCEPT:

Accepted Answer

A) offering to employees who own an interest in the firm. 
B) open market. 
C) tender offer to all existing stockholders. 
D) offer to one or more major stockholders on a negotiated basis. 
A) offering to employees who own an interest in the firm. 
B) open market. 
C) tender offer to all existing stockholders. 
D) offer to one or more major stockholders on a negotiated basis.

Question 5

Which of the following would influence a firm's decision about dividends for large firms?

Accepted Answer

A) Ownership control 
B) Liquidity position 
C) Earnings predictability 
D) Both B and C 
A) Ownership control 
B) Liquidity position 
C) Earnings predictability 
D) Both B and C

Question 6

A stock split will cause changes in the dollar value of which of the following?

Accepted Answer

A) The total value of an investment in the company's stock 
B) The book value of common equity 
C) The market value of common equity 
D) The price of the stock 
A) The total value of an investment in the company's stock 
B) The book value of common equity 
C) The market value of common equity 
D) The price of the stock

Question 7

According to the residual theory of dividends:

Accepted Answer

A) dividends are to be paid out only after investment financing needs have been met. 
B) earnings remaining after payment of preferred stock dividends should be paid to common stockholders. 
C) dividend payments are a constant percentage of EPS. 
D) a dividend is the residual above the payout ratio. 
A) dividends are to be paid out only after investment financing needs have been met. 
B) earnings remaining after payment of preferred stock dividends should be paid to common stockholders. 
C) dividend payments are a constant percentage of EPS. 
D) a dividend is the residual above the payout ratio.

Question 8

Which of the following statements is true?

Accepted Answer

A) The stable dividend payout ratio keeps the dollar amount of the dividend stable. 
B) Dividends usually do not increase unless management is convinced that the higher dividend can be maintained in the future. 
C) The dividend policy which allows for an extra dividend at year-end in prosperous years includes a fairly large regular dividend payment per share every year. 
D) All of the above are true. 
A) The stable dividend payout ratio keeps the dollar amount of the dividend stable. 
B) Dividends usually do not increase unless management is convinced that the higher dividend can be maintained in the future. 
C) The dividend policy which allows for an extra dividend at year-end in prosperous years includes a fairly large regular dividend payment per share every year. 
D) All of the above are true.

Question 9

Most stock splits:

Accepted Answer

A) increase the number of shares outstanding. 
B) increase the value of the company. 
C) tend to raise the price of the stock. 
D) all of the above. 
A) increase the number of shares outstanding. 
B) increase the value of the company. 
C) tend to raise the price of the stock. 
D) all of the above.

Question 10

Which of the following is the most important factor motivating dividend policy for large American corporations?

Accepted Answer

A) Changes in EPS 
B) Maintain constant dividend payout ratio 
C) Avoiding flotation costs of selling new stock 
D) Avoid reducing dividends per share 
A) Changes in EPS 
B) Maintain constant dividend payout ratio 
C) Avoiding flotation costs of selling new stock 
D) Avoid reducing dividends per share

Question 11

Which of the following is a reason that a company would repurchase its own shares of stock in the market?

Accepted Answer

A) To reduce cash and the number of shares outstanding 
B) To increase outstanding equity shares 
C) To have shares available to offer a merger target 
D) Both A and B 
A) To reduce cash and the number of shares outstanding 
B) To increase outstanding equity shares 
C) To have shares available to offer a merger target 
D) Both A and B

Question 12

Trevor Co.'s future earnings for the next four years are predicted below.Assuming there are 500,000 shares outstanding,what will the yearly dividend per share be if the dividend policy is as follows?
a.A constant payout ratio of 40%
b.Stable dollar dividend targeted at 40% of the average earnings over the four-year period
c.Small,regular dividend of $0.75 plus a year-end extra of 40% of profits exceeding $1 million

Accepted Answer

The answer of Trevor Co.'s future earnings for the next...

Question 13

Compare management's motives for preferring either stock repurchases or cash dividends.

Accepted Answer

Cash dividends and repurchase offers are

Question 14

All of the following might influence a firm's dividend payment EXCEPT:

Accepted Answer

A) investment opportunities. 
B) investor transaction costs. 
C) common stock par value. 
D) flotation costs. 
A) investment opportunities. 
B) investor transaction costs. 
C) common stock par value. 
D) flotation costs.

Question 15

By virtue of its nature,dividend policy is inherently a wealth-creating activity for the firm's owners.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following conclusions about dividend policy is reasonable?

Accepted Answer

A) An inverse relation should exist between the amount of acceptable investments a firm has and the dividends remitted to investors. 
B) Management's actions regarding dividends might carry greater weight than a statement by management that earnings will be increasing. 
C) Management should avoid surprising investors when it comes to the firm's dividend decision. 
D) All of the above are reasonable. 
A) An inverse relation should exist between the amount of acceptable investments a firm has and the dividends remitted to investors. 
B) Management's actions regarding dividends might carry greater weight than a statement by management that earnings will be increasing. 
C) Management should avoid surprising investors when it comes to the firm's dividend decision. 
D) All of the above are reasonable.

Question 17

EG's board of directors announced a quarterly dividend of 25 cents.The ex-dividend date is November 3.On November 2,EG's stock closed at $40.00 per share.What is the most likely opening price on November 3?

Accepted Answer

A) $40.25 
B) $39.75 
C) $41.00 
D) $39.00 
A) $40.25 
B) $39.75 
C) $41.00 
D) $39.00

Question 18

Which of the following reasons is used to justify stock repurchases?

Accepted Answer

A) The repurchase narrows ownership. 
B) The repurchase modifies the firm's capital structure. 
C) The repurchase reduces the firm's costs associated with servicing small stockholders. 
D) All of the above. 
A) The repurchase narrows ownership. 
B) The repurchase modifies the firm's capital structure. 
C) The repurchase reduces the firm's costs associated with servicing small stockholders. 
D) All of the above.

Question 19

In the absence of taxes,transaction costs,or changes in a firm's operating or investment policies:

Accepted Answer

A) the greater the payout ratio,the greater the share price of the firm. 
B) the price of a share of stock is not affected by dividend policy. 
C) the firm should retain earnings so stockholders will receive a capital gain. 
D) the firm should pay a dividend only after current equity financing needs have been met. 
A) the greater the payout ratio,the greater the share price of the firm. 
B) the price of a share of stock is not affected by dividend policy. 
C) the firm should retain earnings so stockholders will receive a capital gain. 
D) the firm should pay a dividend only after current equity financing needs have been met.

Question 20

A justification for stable dividends could be:

Accepted Answer

A) satisfaction of guaranteed current income. 
B) satisfaction for stockholders' informational needs. 
C) existence of legal listing. 
D) all of the above. 
A) satisfaction of guaranteed current income. 
B) satisfaction for stockholders' informational needs. 
C) existence of legal listing. 
D) all of the above.

The problem with the residual dividend policy ratio is:

The dividend policy that states smoothing of the dividend stream in order to minimize the effect of company reversals is called the:

Which of the following is most likely to have a negative impact on stock price?

All of the following are methods available to a corporation who desires to repurchase stock EXCEPT:

Which of the following would influence a firm's decision about dividends for large firms?

A stock split will cause changes in the dollar value of which of the following?

According to the residual theory of dividends:

Which of the following statements is true?

Most stock splits:

Which of the following is the most important factor motivating dividend policy for large American corporations?

Which of the following is a reason that a company would repurchase its own shares of stock in the market?

Compare management's motives for preferring either stock repurchases or cash dividends.

All of the following might influence a firm's dividend payment EXCEPT:

By virtue of its nature,dividend policy is inherently a wealth-creating activity for the firm's owners.

Which of the following conclusions about dividend policy is reasonable?

EG's board of directors announced a quarterly dividend of 25 cents.The ex-dividend date is November 3.On November 2,EG's stock closed at $40.00 per share.What is the most likely opening price on November 3?

Which of the following reasons is used to justify stock repurchases?

In the absence of taxes,transaction costs,or changes in a firm's operating or investment policies:

A justification for stable dividends could be:

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

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Exam 16: Dividend Policy

The problem with the residual dividend policy ratio is:

The dividend policy that states smoothing of the dividend stream in order to minimize the effect of company reversals is called the:

Which of the following is most likely to have a negative impact on stock price?

All of the following are methods available to a corporation who desires to repurchase stock EXCEPT:

Which of the following would influence a firm's decision about dividends for large firms?

A stock split will cause changes in the dollar value of which of the following?

According to the residual theory of dividends:

Which of the following statements is true?

Most stock splits:

Which of the following is the most important factor motivating dividend policy for large American corporations?

Which of the following is a reason that a company would repurchase its own shares of stock in the market?

Compare management's motives for preferring either stock repurchases or cash dividends.

All of the following might influence a firm's dividend payment EXCEPT:

By virtue of its nature,dividend policy is inherently a wealth-creating activity for the firm's owners.

Which of the following conclusions about dividend policy is reasonable?

EG's board of directors announced a quarterly dividend of 25 cents.The ex-dividend date is November 3.On November 2,EG's stock closed at $40.00 per share.What is the most likely opening price on November 3?

Which of the following reasons is used to justify stock repurchases?

In the absence of taxes,transaction costs,or changes in a firm's operating or investment policies:

A justification for stable dividends could be:

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters