Exam 14: Payout Policy

Dividend policy is a form of

The ex-dividend period begins four business days prior to the payment date during which a stock will be sold without paying the current dividend.

Due to clientele effect, Modigliani and Miller argue that the shareholders get what they expect and, thus, the value of the firm's stock is unaffected by dividend policy.

Modigliani and Miller suggest that the value of the firm is not affected by the firm's dividend policy, due to

According to the bird-in-the-hand argument, current dividend payments reduce investor uncertainty and result in a higher value for the firm's stock.

The payment of a stock dividend is a shifting of funds between capital accounts rather than a use of funds.

The purpose of a stock split is to

The capital impairment restrictions are established to

Which type of dividend payment policy has the disadvantage that if the firm's earnings drop or if a loss occurs in a given period, dividends may be low or nonexistent?

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

The dividend policy must be formulated considering two basic objectives, namely

Since regularly paying a fixed or increasing dividend eliminates uncertainty about the frequency and magnitude of dividends, it increases the owners' wealth.

In the dividend relevance arguments, current dividend payments are believed to reduce investor's uncertainty, thereby all else being equal placing a higher value on the firm's stock.

Tangshan Mining has common stock at par of $200,000, paid in capital in excess of par of $400,000, and retained earnings of $280,000. In states where the firm's legal capital is defined as the par value of common stock, the firm could pay out ________ in cash dividends without impairing its capital.

A stock split has ________ effect on the firm's capital structure.

In general, the market rewards firms that adopt a fixed or increasing level of dividends rather than a fixed dividend payout policy through higher share prices.

Proponents of the dividend irrelevance theory argue that, all else being equal, an investor's required return and the value of the firm are unaffected by dividend policy, for all of the following reasons, EXCEPT

In most states, legal capital is measured either by the par value of common stock; other states, however, define legal capital to include not only the par value of the stock, but also any paid in capital in excess of par.

The net effect of a stock repurchase is

The problem with the regular dividend policy from the firm's perspective is that