Question 1

Why has the popularity of stock repurchases been growing faster than the cash dividends as a method for companies to distribute cash to their stockholders.

Accepted Answer

Stock repurchases allow investors to tai

Question 2

Assume that as the result of a firm announcing a large unexpected increase in its dividend payment,the price of the firm's common stock rises.This event would be consistent with which of the following?

Accepted Answer

A) The dividend irrelevance theory 
B) The tax preference theory 
C) The information effect 
D) The beta effect 
A) The dividend irrelevance theory 
B) The tax preference theory 
C) The information effect 
D) The beta effect

Question 3

The clientele effect suggests that a firm's dividend policy will be affected by the needs of the shareholders.

Accepted Answer

A) True 
 B)False

Question 4

After a stock split of 2-1,each investor will have one-half of the percentage ownership in the firm that he had before the split.

Accepted Answer

A) True 
 B)False

Question 5

Chandler Corporation has 1 million shares outstanding.The current price per share is $20.If the company decides to use $2 million dollars to repurchase shares at the market price,the company will have ________ shares outstanding worth approximately ________.Assume that the price does not change during the repurchase period.

Accepted Answer

A) 900,000,$20 per share 
B) 1,000,000,$20 per share 
C) 900,000,$22.22 per share 
D) 1,000,000,$18 per share 
A) 900,000,$20 per share 
B) 1,000,000,$20 per share 
C) 900,000,$22.22 per share 
D) 1,000,000,$18 per share

Question 6

ZZZ Corporation has declared a stock dividend that pays one share of stock for every 10 shares owned.What will happen to EPS immediately upon the distribution of the stock dividend?

Accepted Answer

A) There is not enough information to know. 
B) EPS will increase by 10%. 
C) EPS will not be affected by the stock dividend. 
D) EPS will decrease by 10%. 
A) There is not enough information to know. 
B) EPS will increase by 10%. 
C) EPS will not be affected by the stock dividend. 
D) EPS will decrease by 10%.

Question 7

Which of the following describes the effect of a stock dividend?

Accepted Answer

A) A stock dividend immediately increases the market price of a share of stock. 
B) A stock dividend immediately decreases the paid-in capital account. 
C) A stock dividend immediately increases the number of shares outstanding. 
D) A stock dividend indicates that the company must be short on cash. 
A) A stock dividend immediately increases the market price of a share of stock. 
B) A stock dividend immediately decreases the paid-in capital account. 
C) A stock dividend immediately increases the number of shares outstanding. 
D) A stock dividend indicates that the company must be short on cash.

Question 8

Which of the following is the most widely accepted reason that motivates corporations to pay stock dividends?

Accepted Answer

A) To keep the firm's beta within its optimal range 
B) To conserve cash 
C) To reallocate capital to shareholders 
D) All of the above 
A) To keep the firm's beta within its optimal range 
B) To conserve cash 
C) To reallocate capital to shareholders 
D) All of the above

Question 9

In the absence of taxes or transaction costs,investors:

Accepted Answer

A) would prefer immediate dividends to future capital gains. 
B) who did not want a dividend could use dividends to purchase more shares. 
C) could create their own dividends by selling the appropriate number of shares. 
D) Both B and C are correct. 
A) would prefer immediate dividends to future capital gains. 
B) who did not want a dividend could use dividends to purchase more shares. 
C) could create their own dividends by selling the appropriate number of shares. 
D) Both B and C are correct.

Question 10

In response to a temporary decline in earnings per share,most companies would:

Accepted Answer

A) decrease their cash dividend. 
B) not decrease their cash dividend. 
C) suspend their cash dividend. 
D) substitute a stock dividend for the cash dividend. 
A) decrease their cash dividend. 
B) not decrease their cash dividend. 
C) suspend their cash dividend. 
D) substitute a stock dividend for the cash dividend.

Question 11

Which of the following statements is most plausible?

Accepted Answer

A) Increases in stock price associated with a dividend increase are likely due to information conveyed by the increase. 
B) Increases in stock price associated with a dividend increase are likely due to changes in the company's capital structure. 
C) Increases in stock price associated with a dividend increase are likely due to investors' preference for dividends over capital gains. 
D) Increases in stock price associated with a dividend increase are likely due to the favorable tax treatment of dividends over capital gains. 
A) Increases in stock price associated with a dividend increase are likely due to information conveyed by the increase. 
B) Increases in stock price associated with a dividend increase are likely due to changes in the company's capital structure. 
C) Increases in stock price associated with a dividend increase are likely due to investors' preference for dividends over capital gains. 
D) Increases in stock price associated with a dividend increase are likely due to the favorable tax treatment of dividends over capital gains.

Question 12

When a firm makes the decision to pay dividends,it also makes the decision not to reinvest the cash in the firm.

Accepted Answer

A) True 
 B)False

Question 13

The ________ designates the date on which the stock transfer books are closed in regard to a dividend payment.

Accepted Answer

A) declaration date 
B) ex-dividend date 
C) date of record 
D) payment date 
A) declaration date 
B) ex-dividend date 
C) date of record 
D) payment date

Question 14

What are the effects of stock splits and stock dividends? Why are they popular?

Accepted Answer

Economically,the only effect of a stock

Question 15

The residual dividend theory indicates that a firm would never pay dividends unless the firm's profits were larger than its equity financing needs.

Accepted Answer

A) True 
 B)False

Question 16

The stable dividend policy is the most common.

Accepted Answer

A) True 
 B)False

Question 17

Transaction costs:

Accepted Answer

A) encourage firms to retain earnings rather than pay dividends. 
B) encourage firms to pay large dividends.rather than retain earnings. 
C) are encountered whenever a firm pays a dividend. 
D) are incurred when investors fail to cash their dividend check. 
A) encourage firms to retain earnings rather than pay dividends. 
B) encourage firms to pay large dividends.rather than retain earnings. 
C) are encountered whenever a firm pays a dividend. 
D) are incurred when investors fail to cash their dividend check.

Question 18

Firms can use stock repurchases as a dividend substitute.

Accepted Answer

A) True 
 B)False

Question 19

The ex-dividend date is ________ the holder of record date.

Accepted Answer

A) five days before 
B) two weeks before 
C) two days before 
D) three days after 
A) five days before 
B) two weeks before 
C) two days before 
D) three days after

Question 20

Stock dividends and stock splits have the same overall effect.

Accepted Answer

A) True 
 B)False

Why has the popularity of stock repurchases been growing faster than the cash dividends as a method for companies to distribute cash to their stockholders.

Assume that as the result of a firm announcing a large unexpected increase in its dividend payment,the price of the firm's common stock rises.This event would be consistent with which of the following?

The clientele effect suggests that a firm's dividend policy will be affected by the needs of the shareholders.

After a stock split of 2-1,each investor will have one-half of the percentage ownership in the firm that he had before the split.

ZZZ Corporation has declared a stock dividend that pays one share of stock for every 10 shares owned.What will happen to EPS immediately upon the distribution of the stock dividend?

Which of the following describes the effect of a stock dividend?

Which of the following is the most widely accepted reason that motivates corporations to pay stock dividends?

In the absence of taxes or transaction costs,investors:

In response to a temporary decline in earnings per share,most companies would:

Which of the following statements is most plausible?

When a firm makes the decision to pay dividends,it also makes the decision not to reinvest the cash in the firm.

The ________ designates the date on which the stock transfer books are closed in regard to a dividend payment.

What are the effects of stock splits and stock dividends? Why are they popular?

The residual dividend theory indicates that a firm would never pay dividends unless the firm's profits were larger than its equity financing needs.

The stable dividend policy is the most common.

Transaction costs:

Firms can use stock repurchases as a dividend substitute.

The ex-dividend date is ________ the holder of record date.

Stock dividends and stock splits have the same overall effect.

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

Exam 16: Dividend Policy

Why has the popularity of stock repurchases been growing faster than the cash dividends as a method for companies to distribute cash to their stockholders.

Assume that as the result of a firm announcing a large unexpected increase in its dividend payment,the price of the firm's common stock rises.This event would be consistent with which of the following?

The clientele effect suggests that a firm's dividend policy will be affected by the needs of the shareholders.

After a stock split of 2-1,each investor will have one-half of the percentage ownership in the firm that he had before the split.

ZZZ Corporation has declared a stock dividend that pays one share of stock for every 10 shares owned.What will happen to EPS immediately upon the distribution of the stock dividend?

Which of the following describes the effect of a stock dividend?

Which of the following is the most widely accepted reason that motivates corporations to pay stock dividends?

In the absence of taxes or transaction costs,investors:

In response to a temporary decline in earnings per share,most companies would:

Which of the following statements is most plausible?

When a firm makes the decision to pay dividends,it also makes the decision not to reinvest the cash in the firm.

The ________ designates the date on which the stock transfer books are closed in regard to a dividend payment.

What are the effects of stock splits and stock dividends? Why are they popular?

The residual dividend theory indicates that a firm would never pay dividends unless the firm's profits were larger than its equity financing needs.

The stable dividend policy is the most common.

Transaction costs:

Firms can use stock repurchases as a dividend substitute.

The ex-dividend date is ________ the holder of record date.

Stock dividends and stock splits have the same overall effect.

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