Question 1

If a firm's EPS are $8.33, and the firm is paying a dividend of $1.25 per share, what is the firm's dividend payout ratio?

Accepted Answer

A)  33% 
B)  6% 
C)  15% 
D)  25% 
E)  66% 
A)  33% 
B)  6% 
C)  15% 
D)  25% 
E)  66% C

Question 2

Which of the following is the most likely reason for a corporation to cut its dividend?

Accepted Answer

A)  To keep the firm's price within its optimal range. 
B)  Because the company believes that existing dividend levels are no longer sustainable. 
C)  To make the firm more attractive to growth oriented investors. 
D)  To shelter the shareholders from double taxation. 
A)  To keep the firm's price within its optimal range. 
B)  Because the company believes that existing dividend levels are no longer sustainable. 
C)  To make the firm more attractive to growth oriented investors. 
D)  To shelter the shareholders from double taxation. B

Question 3

Which of the following is least important to repurchase decisions of large American corporations?

Accepted Answer

A)  The previous level of dividends. 
B)  the tax consequences to shareholders. 
C)  Lack of good investment opportunities for cash retained in the firm. 
D)  The company is holding more cash than it would like. 
A)  The previous level of dividends. 
B)  the tax consequences to shareholders. 
C)  Lack of good investment opportunities for cash retained in the firm. 
D)  The company is holding more cash than it would like. B

Question 4

Holden Corporation has declared a stock dividend that pays 5 shares of stock for every 10 0 shares owned. What will happen to EPS immediately upon the distribution of the stock dividend?

Accepted Answer

A)  EPS will increase by 5%. 
B)  EPS will decrease by 5%. 
C)  EPS will not be affected by the stock dividend. 
D)  EPS will decrease by 4.76%. 
A)  EPS will increase by 5%. 
B)  EPS will decrease by 5%. 
C)  EPS will not be affected by the stock dividend. 
D)  EPS will decrease by 4.76%.

Question 5

Which of the following dividend policies would cause dividends per share to fluctuate the most?

Accepted Answer

A)  Residual dividend policy 
B)  Stable dollar dividend 
C)  Small, low, regular dividend plus a year-end extra 
D)  Small, low, regular dividend 
A)  Residual dividend policy 
B)  Stable dollar dividend 
C)  Small, low, regular dividend plus a year-end extra 
D)  Small, low, regular dividend

Question 6

The clientele effect suggests that firms can change their dividend policy frequently with no potential adverse effect on the firm.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following typically would NOT affect the dividend policy of the firm?

Accepted Answer

A)  Today's dividend policy is affected by future dividend expectations among investors. 
B)  Managers are afraid to decrease their voting control of the company by issuing stock dividends. 
C)  The failure of so many high-tech and dot.com companies showed that dividends are important to long-term investors. 
D)  The current and future cash flow expectations of the company affect dividend policy. 
A)  Today's dividend policy is affected by future dividend expectations among investors. 
B)  Managers are afraid to decrease their voting control of the company by issuing stock dividends. 
C)  The failure of so many high-tech and dot.com companies showed that dividends are important to long-term investors. 
D)  The current and future cash flow expectations of the company affect dividend policy.

Question 8

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

Accepted Answer

A)  The par value of the stock. 
B)  The book value of common equity 
C)  The per share price of the stock 
D)  A and C, but not B. 
A)  The par value of the stock. 
B)  The book value of common equity 
C)  The per share price of the stock 
D)  A and C, but not B.

Question 9

Kelly owns 10,000 shares in McCormick Spices, which currently has 500,000 shares outstanding. The stock sells for $86 on the open market. McCormick's management has decided on a 2-1 split.
a. Will Kelly's financial position alter after the split, assuming that the stocks will fall proportionately?
b. Assuming only a 35% fall on each stock, what will be Kelly's value after the split?

Accepted Answer

McCormick Spices Corporation - Stock Spl

Question 10

Common stock dividends tend to be more stable than

Accepted Answer

A)  cash flow. 
B)  earnings. 
C)  preferred stock dividends . 
D)  bond interest 
A)  cash flow. 
B)  earnings. 
C)  preferred stock dividends . 
D)  bond interest

Question 11

Compare the Stable Dividend Payout to the Residual Dividend Policy.

Accepted Answer

A stable dividend payout policy tries to

Question 12

Millbury Gas and Oil's rate of return on equity is 12%. It can either pay a dividend of $5.00 today or reinvest the money and pay a dividend of $5.60 at the end of the year. From a shareholder's point of view, the value of the dividend paid now is ________ and the value of the dividend paid a year from now is ________.

Accepted Answer

A)  $5.00, $4.46 
B)  $5.00, $5.00 
C)  $4.46, $5.00 
D)  $5.60, $5.00 
A)  $5.00, $4.46 
B)  $5.00, $5.00 
C)  $4.46, $5.00 
D)  $5.60, $5.00

Question 13

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 14

When a firm begins to pay dividends, it is signalling that it always expects to have enough cash flow to maintain and increase its dividend payout.

Accepted Answer

A) True 
 B)False

Question 15

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

Question 16

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 17

For a company with unpredictable investment needs and opportunities, the best way to distribute cash to shareholders would be

Accepted Answer

A)  a residual dividend policy. 
B)  to repurchase company stock. 
C)  to issue preferred rather than common stock. 
D)  to pay dividends on an irregular basis. 
A)  a residual dividend policy. 
B)  to repurchase company stock. 
C)  to issue preferred rather than common stock. 
D)  to pay dividends on an irregular basis.

Question 18

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 19

Explain the significance of each of the following:
a. announcement date
b. ex-dividend date
c. record date
d. payment date

Accepted Answer

a. announcement date: Date at which the

Question 20

Dividend payouts have the effect of lowering the company's debt to equity ratio.

Accepted Answer

A) True 
 B)False

If a firm's EPS are $8.33, and the firm is paying a dividend of $1.25 per share, what is the firm's dividend payout ratio?

Which of the following is the most likely reason for a corporation to cut its dividend?

Which of the following is least important to repurchase decisions of large American corporations?

Holden Corporation has declared a stock dividend that pays 5 shares of stock for every 10 0 shares owned. What will happen to EPS immediately upon the distribution of the stock dividend?

Which of the following dividend policies would cause dividends per share to fluctuate the most?

The clientele effect suggests that firms can change their dividend policy frequently with no potential adverse effect on the firm.

Which of the following typically would NOT affect the dividend policy of the firm?

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

Common stock dividends tend to be more stable than

Compare the Stable Dividend Payout to the Residual Dividend Policy.

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

When a firm begins to pay dividends, it is signalling that it always expects to have enough cash flow to maintain and increase its dividend payout.

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

Which of the following statements is true?

For a company with unpredictable investment needs and opportunities, the best way to distribute cash to shareholders would be

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

Explain the significance of each of the following: a. announcement date b. ex-dividend date c. record date d. payment date

Dividend payouts have the effect of lowering the company's debt to equity ratio.

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

If a firm's EPS are $8.33, and the firm is paying a dividend of $1.25 per share, what is the firm's dividend payout ratio?

Which of the following is the most likely reason for a corporation to cut its dividend?

Which of the following is least important to repurchase decisions of large American corporations?

Holden Corporation has declared a stock dividend that pays 5 shares of stock for every 10 0 shares owned. What will happen to EPS immediately upon the distribution of the stock dividend?

Which of the following dividend policies would cause dividends per share to fluctuate the most?

The clientele effect suggests that firms can change their dividend policy frequently with no potential adverse effect on the firm.

Which of the following typically would NOT affect the dividend policy of the firm?

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

Common stock dividends tend to be more stable than

Compare the Stable Dividend Payout to the Residual Dividend Policy.

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

When a firm begins to pay dividends, it is signalling that it always expects to have enough cash flow to maintain and increase its dividend payout.

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

Which of the following statements is true?

For a company with unpredictable investment needs and opportunities, the best way to distribute cash to shareholders would be

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

Explain the significance of each of the following: a. announcement date b. ex-dividend date c. record date d. payment date

Dividend payouts have the effect of lowering the company's debt to equity ratio.

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