Question 1

All of the following factors support the proposition that dividend policy matters EXCEPT

Accepted Answer

A) investors desire to minimize and defer taxes,and capital gains get preferential tax treatment over dividend income. 
B) perfect capital markets. 
C) information asymmetry exists between shareholders and managers. 
D) flotation costs significantly increase the cost of new common stock compared to retained earnings. 
A) investors desire to minimize and defer taxes,and capital gains get preferential tax treatment over dividend income. 
B) perfect capital markets. 
C) information asymmetry exists between shareholders and managers. 
D) flotation costs significantly increase the cost of new common stock compared to retained earnings.

Question 2

In order to reduce agency costs,managers may decrease dividends,thus shifting the focus of investors to future capital gains than can only be attained by a well-run corporation.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following transactions will decrease a corporation's retained earnings?

Accepted Answer

A) The corporation declares and pays a $2 per share cash dividend. 
B) The company completes a 2 for 1 stock split. 
C) The company pays a 20% stock dividend. 
D) Both A and C. 
A) The corporation declares and pays a $2 per share cash dividend. 
B) The company completes a 2 for 1 stock split. 
C) The company pays a 20% stock dividend. 
D) Both A and C.

Question 4

DAS,Inc.declared a $0.50 per share dividend on June 1.The date of record is June 20th,the ex-dividend date is June 18th,and the payment date is June 31st.Andre owns a share of stock on June 1.Andre sells his share to Brett on June 19th,and Brett sells the share to LaMarcus on June 29th. Who will receive the dividend?

Accepted Answer

A) Andre 
B) Brett 
C) LaMarcus 
D) no one,since the share was not owned consistently by one person over the period 
A) Andre 
B) Brett 
C) LaMarcus 
D) no one,since the share was not owned consistently by one person over the period

Question 5

Salashar,Inc.'s balance sheet is as follows:   Salashar decides to pay a dividend.Which of the following statements is MOST correct?

Accepted Answer

A) The dividend cannot exceed $1,000,000,the amount of cash available. 
B) The dividend cannot exceed $1,700,000,the amount of net working capital. 
C) The dividend cannot exceed $600,000,the amount of retained earnings. 
D) The dividend cannot exceed $11,000,000,the amount of total assets. 
A) The dividend cannot exceed $1,000,000,the amount of cash available. 
B) The dividend cannot exceed $1,700,000,the amount of net working capital. 
C) The dividend cannot exceed $600,000,the amount of retained earnings. 
D) The dividend cannot exceed $11,000,000,the amount of total assets.

Question 6

Farrah owns 5,000 shares of stock in DAS,Inc.with a market value of $15,000.DAS declares a 20% stock dividend.After the dividend is paid,Farrah owns

Accepted Answer

A) 6,000 shares with a market value of $18,000. 
B) 6,000 shares with a market value of $15,000. 
C) 5,100 shares with a market value of $15,300. 
D) 5,000 shares with a market value of $18,000. 
A) 6,000 shares with a market value of $18,000. 
B) 6,000 shares with a market value of $15,000. 
C) 5,100 shares with a market value of $15,300. 
D) 5,000 shares with a market value of $18,000.

Question 7

A corporation with very high growth prospects and many positive NPV projects to fund may want to increase its dividend based on

Accepted Answer

A) the tax bias against capital gains. 
B) the residual dividend theory. 
C) the information effect. 
D) the very low agency costs of the corporation. 
A) the tax bias against capital gains. 
B) the residual dividend theory. 
C) the information effect. 
D) the very low agency costs of the corporation.

Question 8

Corporations distribute cash back to their owners (stockholders)either as cash dividends or by repurchasing shares of stock in the open market.

Accepted Answer

A) True 
 B)False

Question 9

Low dividends may increase stock value due to the advantage of tax deferral that comes with capital gains.

Accepted Answer

A) True 
 B)False

Question 10

A stock repurchase plan that involves issuing long-term debt to fund the purchase of the company's stock may be used as a way to alter a corporation's capital structure.

Accepted Answer

A) True 
 B)False

Question 11

Dividend policy is influenced by

Accepted Answer

A) a company's investment opportunities. 
B) a firm's capital structure mix. 
C) a company's availability of internally generated funds. 
D) all of the above. 
A) a company's investment opportunities. 
B) a firm's capital structure mix. 
C) a company's availability of internally generated funds. 
D) all of the above.

Question 12

According to the residual theory of dividends

Accepted Answer

A) dividends are a residual 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 earnings per share. 
D) a dividend is the residual above the payout ratio. 
A) dividends are a residual 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 earnings per share. 
D) a dividend is the residual above the payout ratio.

Question 13

For accounting purposes a stock split has been defined as a stock dividend exceeding

Accepted Answer

A) 25 percent. 
B) 35 percent. 
C) 50 percent. 
D) 66 2/3 percent. 
A) 25 percent. 
B) 35 percent. 
C) 50 percent. 
D) 66 2/3 percent.

Question 14

High dividends may increase stock values due to all of the following reasons EXCEPT

Accepted Answer

A) dividends are more certain than capital gains. 
B) higher dividends are used to signal higher expected future earnings. 
C) dividends are used as a tool to minimize agency costs. 
D) higher dividends allow companies to increase their proportion of external equity financing. 
A) dividends are more certain than capital gains. 
B) higher dividends are used to signal higher expected future earnings. 
C) dividends are used as a tool to minimize agency costs. 
D) higher dividends allow companies to increase their proportion of external equity financing.

Question 15

Other things equal,individuals in high-income tax brackets should have a preference for firms that retain their earnings rather than pay dividends.

Accepted Answer

A) True 
 B)False

Question 16

All of the following are potential benefits of stock repurchases EXCEPT

Accepted Answer

A) a means for providing an internal investment opportunity. 
B) an approach for maintaining the existing capital structure while still making a distribution to shareholders. 
C) a favorable impact on earnings per share. 
D) the elimination of a minority ownership group of stockholders. 
A) a means for providing an internal investment opportunity. 
B) an approach for maintaining the existing capital structure while still making a distribution to shareholders. 
C) a favorable impact on earnings per share. 
D) the elimination of a minority ownership group of stockholders.

Question 17

Which of the following is (are)true?

Accepted Answer

A) In general,the higher the number of positive NPV investment opportunities for a firm,the lower the dividend payout ratio. 
B) If the clientele effect is correct,firms should follow a constant dividend payout ratio policy. 
C) According to the informational content of dividends,an increase in dividends is always a positive signal. 
D) In industries with volatile earnings,the residual dividend policy results in the most consistent dividend stream. 
A) In general,the higher the number of positive NPV investment opportunities for a firm,the lower the dividend payout ratio. 
B) If the clientele effect is correct,firms should follow a constant dividend payout ratio policy. 
C) According to the informational content of dividends,an increase in dividends is always a positive signal. 
D) In industries with volatile earnings,the residual dividend policy results in the most consistent dividend stream.

Question 18

There is no difference on an economic basis between a stock dividend and a stock split.

Accepted Answer

A) True 
 B)False

Question 19

Stock repurchases do not alter a company's capital structure since all of the purchased shares are retired and no longer outstanding.

Accepted Answer

A) True 
 B)False

Question 20

In a perfect market,investors are only concerned with total returns and are not concerned whether it is in capital gains or dividend income.

Accepted Answer

A) True 
 B)False

All of the following factors support the proposition that dividend policy matters EXCEPT

In order to reduce agency costs,managers may decrease dividends,thus shifting the focus of investors to future capital gains than can only be attained by a well-run corporation.

Which of the following transactions will decrease a corporation's retained earnings?

Salashar,Inc.'s balance sheet is as follows: Salashar decides to pay a dividend.Which of the following statements is MOST correct?

Farrah owns 5,000 shares of stock in DAS,Inc.with a market value of $15,000.DAS declares a 20% stock dividend.After the dividend is paid,Farrah owns

A corporation with very high growth prospects and many positive NPV projects to fund may want to increase its dividend based on

Corporations distribute cash back to their owners (stockholders)either as cash dividends or by repurchasing shares of stock in the open market.

Low dividends may increase stock value due to the advantage of tax deferral that comes with capital gains.

A stock repurchase plan that involves issuing long-term debt to fund the purchase of the company's stock may be used as a way to alter a corporation's capital structure.

Dividend policy is influenced by

According to the residual theory of dividends

For accounting purposes a stock split has been defined as a stock dividend exceeding

High dividends may increase stock values due to all of the following reasons EXCEPT

Other things equal,individuals in high-income tax brackets should have a preference for firms that retain their earnings rather than pay dividends.

All of the following are potential benefits of stock repurchases EXCEPT

Which of the following is (are)true?

There is no difference on an economic basis between a stock dividend and a stock split.

Stock repurchases do not alter a company's capital structure since all of the purchased shares are retired and no longer outstanding.

In a perfect market,investors are only concerned with total returns and are not concerned whether it is in capital gains or dividend income.

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

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Exam 13: Dividend Policy and Internal Financing

All of the following factors support the proposition that dividend policy matters EXCEPT

In order to reduce agency costs,managers may decrease dividends,thus shifting the focus of investors to future capital gains than can only be attained by a well-run corporation.

Which of the following transactions will decrease a corporation's retained earnings?

Salashar,Inc.'s balance sheet is as follows: Salashar decides to pay a dividend.Which of the following statements is MOST correct?

Farrah owns 5,000 shares of stock in DAS,Inc.with a market value of $15,000.DAS declares a 20% stock dividend.After the dividend is paid,Farrah owns

A corporation with very high growth prospects and many positive NPV projects to fund may want to increase its dividend based on

Corporations distribute cash back to their owners (stockholders)either as cash dividends or by repurchasing shares of stock in the open market.

Low dividends may increase stock value due to the advantage of tax deferral that comes with capital gains.

A stock repurchase plan that involves issuing long-term debt to fund the purchase of the company's stock may be used as a way to alter a corporation's capital structure.

Dividend policy is influenced by

According to the residual theory of dividends

For accounting purposes a stock split has been defined as a stock dividend exceeding

High dividends may increase stock values due to all of the following reasons EXCEPT

Other things equal,individuals in high-income tax brackets should have a preference for firms that retain their earnings rather than pay dividends.

All of the following are potential benefits of stock repurchases EXCEPT

Which of the following is (are)true?

There is no difference on an economic basis between a stock dividend and a stock split.

Stock repurchases do not alter a company's capital structure since all of the purchased shares are retired and no longer outstanding.

In a perfect market,investors are only concerned with total returns and are not concerned whether it is in capital gains or dividend income.

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

Filters