Question 1

When a firm pays a stated dollar dividend and adjusts the payment as earnings increase, itsdividend policy can be called

Accepted Answer

A)  a target dividend pay-out ratio policy. 
B)  a regular dividend policy. 
C)  a constant-payout-ratio dividend policy. 
D)  a low-regular-and-extra dividend policy. 
A)  a target dividend pay-out ratio policy. 
B)  a regular dividend policy. 
C)  a constant-payout-ratio dividend policy. 
D)  a low-regular-and-extra dividend policy.

Question 2

A dividend reinvestment plan _________on the security.

Accepted Answer

A)  has an undetermined effect 
B)  decreases the return 
C)  increases the return 
D)  has no effect on the return 
A)  has an undetermined effect 
B)  decreases the return 
C)  increases the return 
D)  has no effect on the return

Question 3

__________are offers by a company to purchase a certain percentage of its own shares at a stated price within a specified time period.

Accepted Answer

A)  Substantial issuer bids 
B)  Tender bids 
C)  Fixed-price tender bids 
D)  All of the above 
A)  Substantial issuer bids 
B)  Tender bids 
C)  Fixed-price tender bids 
D)  All of the above

Question 4

Firms are usually prohibited by Canadian law from distributing

Accepted Answer

A)  dividends in a year the firm has a net loss. 
B)  assets as dividends. 
C)  paid-in capital as dividends. 
D)  retained earnings as dividends. 
A)  dividends in a year the firm has a net loss. 
B)  assets as dividends. 
C)  paid-in capital as dividends. 
D)  retained earnings as dividends.

Question 5

The factors involved in setting a dividend policy include all of the following EXCEPT

Accepted Answer

A)  restrictive covenants in a bond indenture. 
B)  capital impairment restrictions. 
C)  growth prospects. 
D)  the legal prohibition on paying dividends which exceed current earnings. 
A)  restrictive covenants in a bond indenture. 
B)  capital impairment restrictions. 
C)  growth prospects. 
D)  the legal prohibition on paying dividends which exceed current earnings.

Question 6

In Canada, stock repurchases may be preferred to cash dividends due to the favourable tax treatment of capital gains relative to dividend income.

Accepted Answer

A) True 
 B)False

Question 7

A firm's 10,000,000 shares have a market value of $1 billion. If the firm splits its stock 4 for 1, the per share value will be $25 after the split.

Accepted Answer

A) True 
 B)False

Question 8

The purpose of a reverse stock split is to

Accepted Answer

A)  increase the dividend. 
B)  increase the price of stock. 
C)  issue additional shares. 
D)  reduce trading activity. 
A)  increase the dividend. 
B)  increase the price of stock. 
C)  issue additional shares. 
D)  reduce trading activity.

Question 9

The net effect of a stock repurchase is

Accepted Answer

A)  similar to a stock split. 
B)  similar to the payment of a stock dividend. 
C)  similar to a cash dividend. 
D)  similar to a reverse stock split. 
A)  similar to a stock split. 
B)  similar to the payment of a stock dividend. 
C)  similar to a cash dividend. 
D)  similar to a reverse stock split.

Question 10

In case of stock dividends, the shareholder's proportion of ownership in the firm remains the same,and as long as the firm's earnings remain unchanged, so does his or her share of total earnings.

Accepted Answer

A) True 
 B)False

Question 11

After the stock dividend is paid, the per share value of the stockholder's stock will remain the same as the value before the stock dividend and, thus, the market value of his or her total holdings in the firm will remain unchanged.

Accepted Answer

A) True 
 B)False

Question 12

The clientele effect refers to

Accepted Answer

A)  the relevance of dividend policy on share value. 
B)  the firm's ability to attract stockholders whose dividend preferences are similar to the firm's dividend policy. 
C)  the "bird-in-the-hand" argument. 
D)  the informational content of dividends. 
A)  the relevance of dividend policy on share value. 
B)  the firm's ability to attract stockholders whose dividend preferences are similar to the firm's dividend policy. 
C)  the "bird-in-the-hand" argument. 
D)  the informational content of dividends.

Question 13

The shareholder receiving a stock dividend receives a share of common stock of equal value to their existing shares of common stock.

Accepted Answer

A) True 
 B)False

Question 14

The accounting in a stock split will transfer funds

Accepted Answer

A)  from the Retained Earnings account to the Preferred Stock account. 
B)  from the Common Stock account to the Retained Earnings account. 
C)  from the Retained Earnings account to the Common Stock account. 
D)  from none of the above. 
A)  from the Retained Earnings account to the Preferred Stock account. 
B)  from the Common Stock account to the Retained Earnings account. 
C)  from the Retained Earnings account to the Common Stock account. 
D)  from none of the above.

Question 15

Date of record (dividends) is the actual date on which the company will mail the dividend payment to the holders of record.

Accepted Answer

A) True 
 B)False

Question 16

The payment of cash dividends to corporate stockholders is decided by the

Accepted Answer

A)  board of directors. 
B)  stockholders. 
C)  management. 
D)  SEC. 
A)  board of directors. 
B)  stockholders. 
C)  management. 
D)  SEC.

Question 17

The dividend decisions can significantly affect the firm's share price and external financing requirements.

Accepted Answer

A) True 
 B)False

Question 18

The problem with a constant-pay-out-ratio dividend policy from the shareholder's perspective is that

Accepted Answer

A)  even when earnings are low, the company must pay a fixed dividend. 
B)  there is no informational content. 
C)  it bores the shareholders. 
D)  if the firm's earnings drop, so does the dividend payment. 
A)  even when earnings are low, the company must pay a fixed dividend. 
B)  there is no informational content. 
C)  it bores the shareholders. 
D)  if the firm's earnings drop, so does the dividend payment.

Question 19

The repurchase of common stock results in a type of reverse dilution, since the earnings per shareand the market price of stock are increased by reducing the number of shares outstanding.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following investors would prefer a low dividend payout for taxation reasons?

Accepted Answer

A)  an elderly women on a modest fixed income 
B)  a doctor holding the security outside a registered pension plan 
C)  a law professor holding the security inside a registered retirement pension plan 
D)  an insurance company holding the security for investment purposes 
A)  an elderly women on a modest fixed income 
B)  a doctor holding the security outside a registered pension plan 
C)  a law professor holding the security inside a registered retirement pension plan 
D)  an insurance company holding the security for investment purposes

When a firm pays a stated dollar dividend and adjusts the payment as earnings increase, itsdividend policy can be called

A dividend reinvestment plan _________on the security.

__________are offers by a company to purchase a certain percentage of its own shares at a stated price within a specified time period.

Firms are usually prohibited by Canadian law from distributing

The factors involved in setting a dividend policy include all of the following EXCEPT

In Canada, stock repurchases may be preferred to cash dividends due to the favourable tax treatment of capital gains relative to dividend income.

A firm's 10,000,000 shares have a market value of $1 billion. If the firm splits its stock 4 for 1, the per share value will be $25 after the split.

The purpose of a reverse stock split is to

The net effect of a stock repurchase is

In case of stock dividends, the shareholder's proportion of ownership in the firm remains the same,and as long as the firm's earnings remain unchanged, so does his or her share of total earnings.

After the stock dividend is paid, the per share value of the stockholder's stock will remain the same as the value before the stock dividend and, thus, the market value of his or her total holdings in the firm will remain unchanged.

The clientele effect refers to

The shareholder receiving a stock dividend receives a share of common stock of equal value to their existing shares of common stock.

The accounting in a stock split will transfer funds

Date of record (dividends) is the actual date on which the company will mail the dividend payment to the holders of record.

The payment of cash dividends to corporate stockholders is decided by the

The dividend decisions can significantly affect the firm's share price and external financing requirements.

The problem with a constant-pay-out-ratio dividend policy from the shareholder's perspective is that

The repurchase of common stock results in a type of reverse dilution, since the earnings per shareand the market price of stock are increased by reducing the number of shares outstanding.

Which of the following investors would prefer a low dividend payout for taxation reasons?

Overview of Corporate Finance

Financial Statements, Cash Flows, and Taxes

Financial Statement Analysis

Financial Planning and Forecasting

Financial Markets, Institutions, and Securities

Time Value of Money

Risk and Return

Valuation of Financial Securities

The Cost of Capital

Leverage and Capital Structure

Capital Budgeting: Principles and Techniques

Dealing With Project Risk and Other Topics in Capital Budgeting

Working Capital and Management of Current Assets

Management of Current Liabilities

Lease Financing: Concepts and Techniques

Corporate Securities, Derivatives, and Swaps

Mergers and Acquisitions, and Business Failure

International Corporate Finance

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Exam 11: Dividend Policy

When a firm pays a stated dollar dividend and adjusts the payment as earnings increase, itsdividend policy can be called

A dividend reinvestment plan _________on the security.

__________are offers by a company to purchase a certain percentage of its own shares at a stated price within a specified time period.

Firms are usually prohibited by Canadian law from distributing

The factors involved in setting a dividend policy include all of the following EXCEPT

In Canada, stock repurchases may be preferred to cash dividends due to the favourable tax treatment of capital gains relative to dividend income.

A firm's 10,000,000 shares have a market value of $1 billion. If the firm splits its stock 4 for 1, the per share value will be $25 after the split.

The purpose of a reverse stock split is to

The net effect of a stock repurchase is

In case of stock dividends, the shareholder's proportion of ownership in the firm remains the same,and as long as the firm's earnings remain unchanged, so does his or her share of total earnings.

After the stock dividend is paid, the per share value of the stockholder's stock will remain the same as the value before the stock dividend and, thus, the market value of his or her total holdings in the firm will remain unchanged.

The clientele effect refers to

The shareholder receiving a stock dividend receives a share of common stock of equal value to their existing shares of common stock.

The accounting in a stock split will transfer funds

Date of record (dividends) is the actual date on which the company will mail the dividend payment to the holders of record.

The payment of cash dividends to corporate stockholders is decided by the

The dividend decisions can significantly affect the firm's share price and external financing requirements.

The problem with a constant-pay-out-ratio dividend policy from the shareholder's perspective is that

The repurchase of common stock results in a type of reverse dilution, since the earnings per shareand the market price of stock are increased by reducing the number of shares outstanding.

Which of the following investors would prefer a low dividend payout for taxation reasons?

Overview of Corporate Finance

Financial Statements, Cash Flows, and Taxes

Financial Statement Analysis

Financial Planning and Forecasting

Financial Markets, Institutions, and Securities

Time Value of Money

Risk and Return

Valuation of Financial Securities

The Cost of Capital

Leverage and Capital Structure

Capital Budgeting: Principles and Techniques

Dealing With Project Risk and Other Topics in Capital Budgeting

Working Capital and Management of Current Assets

Management of Current Liabilities

Lease Financing: Concepts and Techniques

Corporate Securities, Derivatives, and Swaps

Mergers and Acquisitions, and Business Failure

International Corporate Finance

Filters