Question 1

Once a firm has earnings, management has essentially two choices: distribute or retain them.​

Accepted Answer

A) True 
 B)False

Question 2

Most publicly held American firms that pay dividends tend to pay a regular quarterly cash dividend.​

Accepted Answer

A) True 
 B)False

Question 3

When a stock goes ex‑dividend, its price tends to decline by the amount of the cash dividend. l> ​

Accepted Answer

A) True 
 B)False

Question 4

If a stock's price is $90 and the stock is split three for one, the price becomes

Accepted Answer

A)  ​$90 
B)  ​$60 
C)  ​$45 
D)  ​$30 
A)  ​$90 
B)  ​$60 
C)  ​$45 
D)  ​$30

Question 5

The retention of earnings instead of paying dividends

Accepted Answer

A)  may result in greater growth and higher stock prices 
B)  ​is advantageous for all stockholders 
C)  ​is favored by stockholders in lower income tax brackets 
D)  ​leads to lower future dividends 
A)  may result in greater growth and higher stock prices 
B)  ​is advantageous for all stockholders 
C)  ​is favored by stockholders in lower income tax brackets 
D)  ​leads to lower future dividends

Question 6

A reverse split increases the number of shares the firm has outstanding.​

Accepted Answer

A) True 
 B)False

Question 7

Dividend reinvestment plans permit stockholders to defer income taxes on dividends.​

Accepted Answer

A) True 
 B)False

Question 8

A stock dividend causes the firm's​

Accepted Answer

A)  ​assets to increase 
B)  ​equity to increase 
C)  ​liabilities to remain unchanged 
D)  ​assets to decrease 
A)  ​assets to increase 
B)  ​equity to increase 
C)  ​liabilities to remain unchanged 
D)  ​assets to decrease

Question 9

Currently the price of a stock is $58 a share. The firm's balance sheet is as follows:
​ Assets Liabilities and Equity
Cash $\$ 10,000,000$ Accounts payable $\$ 20,000,000$
Accounts 250,000,000 Long-term debt $400,000,000$
receivable Common stock ( $\$ 10$ par; $10,000,000$
Inventory $120,000,000 \quad 1,000,000$ shares outstanding)
Plant and 325,000,000 Paid-in capital $90,000,000$
equipment _ Retained earnings $\underline { 185,000,000 }$
$\$ 705,000,000$
$\$ 705,000,000$ ​
​
Construct a new balance sheet showing the impact of a two-for-one stock split. What will be the new price of the stock?

Accepted Answer

The new balance sheet after the two-for-

Question 10

Which of the following are true concerning dividend reinvestment plans?
​1) taxes are deferred
2) they offer stockholders a convenient means to save
3) the firm may pay the brokerage and other fees associated with the plans

Accepted Answer

A) ​1 and 2 
B) ​1 and 3 
C) ​2 and 3 
D) ​1, 2, and 3 
A) ​1 and 2 
B) ​1 and 3 
C) ​2 and 3 
D) ​1, 2, and 3

Question 11

A constant payout ratio implies dividends vary with earnings.​

Accepted Answer

A) True 
 B)False

Question 12

A stock dividend decreases retained earnings.​

Accepted Answer

A) True 
 B)False

Question 13

Pre-emptive rights mean that current stockholders have the right to maintain their proportionate ownership before new shares may be sold to the general public.​

Accepted Answer

A) True 
 B)False

Question 14

A company whose stock is selling for $45 has the following balance sheet: $\begin{array}{ll}
\text { Assets }\quad\$32,000\quad\quad\quad\text { Liabilities }\quad\$10,000\
\text { Common stock }&6,000\
\text { (\$6 par; 1,000 }\text { shares issued) }\\text { Additional paid-in capital  }&2,000\\text { Retained eamings }&14,000
\end{array}$
 ​ 
a. Construct a new balance sheet showing a 3 for 1 stock split. What is the new price for the stock?
​
b. What would be the balance sheet if the firm paid a 10 percent stock dividend (instead of the stock split)?
​

Accepted Answer

Three for one split:
\(\begin{array}{ll

Question 15

Dividends may be paid in
1) cash
2) stock
3) retained earnings

Accepted Answer

A) ​1 and 2 
B) ​1 and 3 
C) ​2 and 3 
D) ​1, 2, and 3 
A) ​1 and 2 
B) ​1 and 3 
C) ​2 and 3 
D) ​1, 2, and 3

Question 16

Dividends reinvested are not subject to federal income tax.​

Accepted Answer

A) True 
 B)False

Question 17

Cumulative voting concentrates voting power in the hands of a majority of corporate voters.​

Accepted Answer

A) True 
 B)False

Question 18

The owners of a corporation elect the board of directors.​

Accepted Answer

A) True 
 B)False

Question 19

A cash dividend reduces the firm's assets.​

Accepted Answer

A) True 
 B)False

Question 20

Stockholders who seek to defer taxes prefer capital gains to dividends.​

Accepted Answer

A) True 
 B)False

Exam 10: The Features of Stock

Once a firm has earnings, management has essentially two choices: distribute or retain them.​

Most publicly held American firms that pay dividends tend to pay a regular quarterly cash dividend.​

When a stock goes ex‑dividend, its price tends to decline by the amount of the cash dividend. l> ​

If a stock's price is $90 and the stock is split three for one, the price becomes

The retention of earnings instead of paying dividends

A reverse split increases the number of shares the firm has outstanding.​

Dividend reinvestment plans permit stockholders to defer income taxes on dividends.​

A stock dividend causes the firm's​

Which of the following are true concerning dividend reinvestment plans? ​1) taxes are deferred 2) they offer stockholders a convenient means to save 3) the firm may pay the brokerage and other fees associated with the plans

A constant payout ratio implies dividends vary with earnings.​

A stock dividend decreases retained earnings.​

Pre-emptive rights mean that current stockholders have the right to maintain their proportionate ownership before new shares may be sold to the general public.​

Dividends may be paid in 1) cash 2) stock 3) retained earnings

Dividends reinvested are not subject to federal income tax.​

Cumulative voting concentrates voting power in the hands of a majority of corporate voters.​

The owners of a corporation elect the board of directors.​

A cash dividend reduces the firm's assets.​

Stockholders who seek to defer taxes prefer capital gains to dividends.​

The Role of Financial Markets and Financial Intermediaries

Investment Banking

Securities Markets

The Federal Reserve

International Currency Flows

The Time Value of Money

Risk and Its Measurement

Analysis of Financial Statements

Stock Valuation

The Features of Long-Term Debt - Bonds

Bond Pricing and Yields

Preferred Stock

Convertile Securities

Investment Returns

Investment Companies

Forms of Businss and Corporate Taxation

Break-Even Analysis and the Payback Period

Leverage

Cost of Capital

Capital Budgeting

Forecasting

Cash Budgeting

Management of Current Assets

Management of Short-Term Liabilities

Intermediate-Term Debt and Leasing

Options: Puts and Calls

Futures and Swaps

Filters

Once a firm has earnings, management has essentially two choices: distribute or retain them.

Most publicly held American firms that pay dividends tend to pay a regular quarterly cash dividend.

When a stock goes ex‑dividend, its price tends to decline by the amount of the cash dividend. l>

A reverse split increases the number of shares the firm has outstanding.

Dividend reinvestment plans permit stockholders to defer income taxes on dividends.

A stock dividend causes the firm's

Which of the following are true concerning dividend reinvestment plans? 1) taxes are deferred 2) they offer stockholders a convenient means to save 3) the firm may pay the brokerage and other fees associated with the plans

A constant payout ratio implies dividends vary with earnings.

A stock dividend decreases retained earnings.

Pre-emptive rights mean that current stockholders have the right to maintain their proportionate ownership before new shares may be sold to the general public.

Dividends reinvested are not subject to federal income tax.

Cumulative voting concentrates voting power in the hands of a majority of corporate voters.

The owners of a corporation elect the board of directors.

A cash dividend reduces the firm's assets.

Stockholders who seek to defer taxes prefer capital gains to dividends.