Question 1

Paying a stock dividend ________ the retained earnings account.

Accepted Answer

A)  decreases 
B)  has no effect on 
C)  increases 
D)  reorganizes 
A)  decreases 
B)  has no effect on 
C)  increases 
D)  reorganizes A

Question 2

The "treasury stock" is an accounting entry on the firm's balance sheet to designate the firm's total investment in government securities.

Accepted Answer

A) True 
 B)False  False

Question 3

Stock repurchases may be made for all of the following reasons EXCEPT

Accepted Answer

A)  to enhance shareholder value by reducing the number of shares outstanding and thereby raising earnings per share. 
B)  to help discourage an unfriendly takeover by reducing the number of publicly traded shares. 
C)  to make shares available for stock option plans. 
D)  to make shares available for stock dividends. 
A)  to enhance shareholder value by reducing the number of shares outstanding and thereby raising earnings per share. 
B)  to help discourage an unfriendly takeover by reducing the number of publicly traded shares. 
C)  to make shares available for stock option plans. 
D)  to make shares available for stock dividends. D

Question 4

Mr. R. owns 20,000 shares of ABC Corporation stock. The company is planning to issue a stock dividend. Before the dividend Mr. R. owned 10 percent of the outstanding stock, which had a market value of $200,000, or $10 per share. Upon receiving the 10 percent stock dividend the value of his shares is

Accepted Answer

A)  $220,000. 
B)  $210,000. 
C)  $200,000. 
D)  greater, but cannot be determined. 
A)  $220,000. 
B)  $210,000. 
C)  $200,000. 
D)  greater, but cannot be determined.

Question 5

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

Accepted Answer

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

Question 6

Tangshan Mining has 100,000 shares outstanding and just declared a 20% stock dividend. Before the announcement, the firm's shares were trading at $50.00 per share. After the stock dividend, the firm's shares should trade at ________ per share.

Accepted Answer

A)  $40.00 
B)  $41.66 
C)  $46.33 
D)  remain unchanged 
A)  $40.00 
B)  $41.66 
C)  $46.33 
D)  remain unchanged

Question 7

When purchasing outstanding shares of common stock a firm can utilize all of the following methods EXCEPT

Accepted Answer

A)  a purchase on the open market at market prices. 
B)  a tender offer at varying prices. 
C)  a tender offer at a specified price. 
D)  by purchasing a large block on a negotiated basis. 
A)  a purchase on the open market at market prices. 
B)  a tender offer at varying prices. 
C)  a tender offer at a specified price. 
D)  by purchasing a large block on a negotiated basis.

Question 8

Under the Jobs and Growth Tax Relief Reconciliation Act of 2003, the maximum rate of taxation on dividends received by shareholders was set at

Accepted Answer

A)  18%. 
B)  20%. 
C)  25%. 
D)  none of the above. 
A)  18%. 
B)  20%. 
C)  25%. 
D)  none of the above.

Question 9

A constant-payout-ratio dividend policy is a dividend policy based on the payment to existing owners of a dividend in the form of stock as a certain percentage of the firm's total number of stocks outstanding in each dividend period.

Accepted Answer

A) True 
 B)False

Question 10

A dividend reinvestment plan ________ on the security.

Accepted Answer

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

Question 11

Because dividends are taxed at the same rate as capital gains under the 2003 Tax Act, a firm's strategy of paying low or no dividends primarily offers tax advantages to wealthy stockholders through tax deferral rather than as a result of a lower tax rate on current income.

Accepted Answer

A) True 
 B)False

Question 12

Stockholders dislike dividends that

Accepted Answer

A)  are fixed. 
B)  fluctuate with earnings. 
C)  are continuous. 
D)  increase. 
A)  are fixed. 
B)  fluctuate with earnings. 
C)  are continuous. 
D)  increase.

Question 13

By purchasing shares through a firm's dividend reinvestment plan (or DRIP), shareholders typically can acquire shares at a value that is above the prevailing market price.

Accepted Answer

A) True 
 B)False

Question 14

A stock split commonly increases the number of shares outstanding and the stock's per share par value.

Accepted Answer

A) True 
 B)False

Question 15

The repurchase of stock ________ the earnings per share and ________ the market price of stock.

Accepted Answer

A)  increases; increases 
B)  decreases; decreases 
C)  increases; decreases 
D)  decreases; increases 
A)  increases; increases 
B)  decreases; decreases 
C)  increases; decreases 
D)  decreases; increases

Question 16

A firm has had the following earnings history over the last five years:   If the firm's dividend policy was based on a constant payout ratio of 50 percent for all of the years with earnings over $1.50 per share and a zero payout otherwise, the annual dividends for 1999 and 2003 were

Accepted Answer

A)  $0.50 and $1.25, respectively. 
B)  $0 and $2.00, respectively. 
C)  $0 and $1.25, respectively. 
D)  $0 and $0.88, respectively. 
A)  $0.50 and $1.25, respectively. 
B)  $0 and $2.00, respectively. 
C)  $0 and $1.25, respectively. 
D)  $0 and $0.88, respectively.

Question 17

The regular dividend policy provides the owners with generally positive information, indicating that the firm is okay and thereby minimizing their uncertainty.

Accepted Answer

A) True 
 B)False

Question 18

A firm has the following stockholders' equity balances:   In states where the firm's legal capital is defined as the par value of its common stock, the maximum cash dividend the firm could pay is

Accepted Answer

A)  $3,600,000. 
B)  $400,000. 
C)  $3,200,000. 
D)  $1,600,000. 
A)  $3,600,000. 
B)  $400,000. 
C)  $3,200,000. 
D)  $1,600,000.

Question 19

At a firm's quarterly dividend meeting held April 9, the directors declared a $0.50 per share cash dividend for the holders of record on Monday, May 1. The firm's stock will sell ex-dividends on

Accepted Answer

A)  April 9. 
B)  May 5. 
C)  April 25. 
D)  April 27. 
A)  April 9. 
B)  May 5. 
C)  April 25. 
D)  April 27.

Question 20

An excess earnings accumulation tax is levied when

Accepted Answer

A)  shareholders receive dividends which exceed the firm's earnings. 
B)  firms do not pay dividends in order to delay the owner's tax liability. 
C)  firms do not pay dividends to reinvest in the firm. 
D)  earnings exceed dividends. 
A)  shareholders receive dividends which exceed the firm's earnings. 
B)  firms do not pay dividends in order to delay the owner's tax liability. 
C)  firms do not pay dividends to reinvest in the firm. 
D)  earnings exceed dividends.

Paying a stock dividend ________ the retained earnings account.

The "treasury stock" is an accounting entry on the firm's balance sheet to designate the firm's total investment in government securities.

Stock repurchases may be made for all of the following reasons EXCEPT

Mr. R. owns 20,000 shares of ABC Corporation stock. The company is planning to issue a stock dividend. Before the dividend Mr. R. owned 10 percent of the outstanding stock, which had a market value of $200,000, or $10 per share. Upon receiving the 10 percent stock dividend the value of his shares is

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

Tangshan Mining has 100,000 shares outstanding and just declared a 20% stock dividend. Before the announcement, the firm's shares were trading at $50.00 per share. After the stock dividend, the firm's shares should trade at ________ per share.

When purchasing outstanding shares of common stock a firm can utilize all of the following methods EXCEPT

Under the Jobs and Growth Tax Relief Reconciliation Act of 2003, the maximum rate of taxation on dividends received by shareholders was set at

A constant-payout-ratio dividend policy is a dividend policy based on the payment to existing owners of a dividend in the form of stock as a certain percentage of the firm's total number of stocks outstanding in each dividend period.

A dividend reinvestment plan ________ on the security.

Because dividends are taxed at the same rate as capital gains under the 2003 Tax Act, a firm's strategy of paying low or no dividends primarily offers tax advantages to wealthy stockholders through tax deferral rather than as a result of a lower tax rate on current income.

Stockholders dislike dividends that

By purchasing shares through a firm's dividend reinvestment plan (or DRIP), shareholders typically can acquire shares at a value that is above the prevailing market price.

A stock split commonly increases the number of shares outstanding and the stock's per share par value.

The repurchase of stock the earnings per share and the market price of stock.

A firm has had the following earnings history over the last five years: If the firm's dividend policy was based on a constant payout ratio of 50 percent for all of the years with earnings over $1.50 per share and a zero payout otherwise, the annual dividends for 1999 and 2003 were

The regular dividend policy provides the owners with generally positive information, indicating that the firm is okay and thereby minimizing their uncertainty.

A firm has the following stockholders' equity balances: In states where the firm's legal capital is defined as the par value of its common stock, the maximum cash dividend the firm could pay is

At a firm's quarterly dividend meeting held April 9, the directors declared a $0.50 per share cash dividend for the holders of record on Monday, May 1. The firm's stock will sell ex-dividends on

An excess earnings accumulation tax is levied when

The Role of Managerial Finance

The Financial Market Environment

Financial Statements and Ratio Analysis

Cash Flow and Financial Planning

Time Value of Money

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return

The Cost of Capital

Capital Budgeting Techniques

Capital Budgeting Cash Flows

Risk and Refinements in Capital Budgeting

Leverage and Capital Structure

Working Capital and Current Assets Management

Current Liabilities Management

Hybrid and Derivative Securities

Mergers, Lbos, Divestitures, and Business Failure

International Managerial Finance

Filters

Exam 14: Payout Policy

Paying a stock dividend ________ the retained earnings account.

The "treasury stock" is an accounting entry on the firm's balance sheet to designate the firm's total investment in government securities.

Stock repurchases may be made for all of the following reasons EXCEPT

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

Tangshan Mining has 100,000 shares outstanding and just declared a 20% stock dividend. Before the announcement, the firm's shares were trading at $50.00 per share. After the stock dividend, the firm's shares should trade at ________ per share.

When purchasing outstanding shares of common stock a firm can utilize all of the following methods EXCEPT

Under the Jobs and Growth Tax Relief Reconciliation Act of 2003, the maximum rate of taxation on dividends received by shareholders was set at

A constant-payout-ratio dividend policy is a dividend policy based on the payment to existing owners of a dividend in the form of stock as a certain percentage of the firm's total number of stocks outstanding in each dividend period.

A dividend reinvestment plan ________ on the security.

Because dividends are taxed at the same rate as capital gains under the 2003 Tax Act, a firm's strategy of paying low or no dividends primarily offers tax advantages to wealthy stockholders through tax deferral rather than as a result of a lower tax rate on current income.

Stockholders dislike dividends that

By purchasing shares through a firm's dividend reinvestment plan (or DRIP), shareholders typically can acquire shares at a value that is above the prevailing market price.

A stock split commonly increases the number of shares outstanding and the stock's per share par value.

The repurchase of stock ________ the earnings per share and ________ the market price of stock.

A firm has had the following earnings history over the last five years: If the firm's dividend policy was based on a constant payout ratio of 50 percent for all of the years with earnings over $1.50 per share and a zero payout otherwise, the annual dividends for 1999 and 2003 were

The regular dividend policy provides the owners with generally positive information, indicating that the firm is okay and thereby minimizing their uncertainty.

A firm has the following stockholders' equity balances: In states where the firm's legal capital is defined as the par value of its common stock, the maximum cash dividend the firm could pay is

At a firm's quarterly dividend meeting held April 9, the directors declared a $0.50 per share cash dividend for the holders of record on Monday, May 1. The firm's stock will sell ex-dividends on

An excess earnings accumulation tax is levied when

The Role of Managerial Finance

The Financial Market Environment

Financial Statements and Ratio Analysis

Cash Flow and Financial Planning

Time Value of Money

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return

The Cost of Capital

Capital Budgeting Techniques

Capital Budgeting Cash Flows

Risk and Refinements in Capital Budgeting

Leverage and Capital Structure

Working Capital and Current Assets Management

Current Liabilities Management

Hybrid and Derivative Securities

Mergers, Lbos, Divestitures, and Business Failure

International Managerial Finance

Filters

The repurchase of stock the earnings per share and the market price of stock.