Question 1

Legal capital can be thought of as the original contributions of the owners consisting of

Accepted Answer

A)   retained earnings paid by the shareholders.
B)   par value plus paid-in-capital in excess of par value paid by the shareholders.
C)   par value plus retained earnings paid by the shareholders.
D)   par value paid by the shareholders.

Question 2

Which of the following dividend policies would most likely have the greatest variability in actual dividends paid?

Accepted Answer

A)   Sticky dividend policy
B)   A policy of raising dividends by a fixed dollar amount
C)   A policy of raising dividends by a fixed percentage amount
D)   Residual dividend policy D

Question 3

The final distribution of cash to shareholders after a company has been sold off or discontinued operations is called a ________ dividend.

Accepted Answer

A)   complete
B)   liquidating
C)   stock
D)   optimal

Question 4

Which of following is a reason for a low-dividend-payout policy?

Accepted Answer

A)   Low-dividend-payout clientele are willing to pay a higher price per share than high-dividend payout clientele.
B)   Avoidance of transaction costs for selling shares
C)   Convenient and direct deposit of cash dividend
D)   Less need for additional costly outside funding

Question 5

Which of the following is NOT a common bondholder covenant?

Accepted Answer

A)   Dividends cannot be paid unless there is sufficient cash to cover the next coupon payment.
B)   Dividends may be prohibited above a certain percentage of current earnings.
C)   If the firm has insufficient cash to cover required coupon payments, shareholders will pay interest directly from their own accounts on a pro rata basis.
D)   All of the above are common bondholder covenants. C

Question 6

After placing an order to buy or sell shares of stock through your broker, which of the following statements is true regarding the settlement date for the order?

Accepted Answer

A)   The settlement date is the same day as the agreed-upon trade.
B)   The settlement date is one day after the agreed-upon trade.
C)   The settlement date is two days after the agreed-upon trade.
D)   The settlement date is three days after the agreed-upon trade.

Question 7

Which of the following commonly stated reasons for stock splits has the weakest empirical evidence in support?

Accepted Answer

A)   To remain at or return to a preferred trading range
B)   A signal to the market about expected continued strong performance
C)   Increased liquidity
D)   All of the above reasons have strong empirical evidence to support them.

Question 8

A firm will set its dividend policy high enough so that it can continually meet the distribution level of the cash dividend in spite of variances in cash inflow from operations and in cash outflows for maintenance and investing.

Accepted Answer

A) True 
 B)False

Question 9

All investors want the maximum amount of dividends possible.

Accepted Answer

A) True 
 B)False

Question 10

Low-dividend stocks are preferred by clients who prefer to delay taxes.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is NOT a reason for a low-dividend-payout policy?

Accepted Answer

A)   The avoidance or postponement of taxes on distributions for shareholders
B)   Low-dividend-payout clientele are willing to pay a higher price per share than high-dividend payout clientele
C)   Less need for additional costly outside funding
D)   Higher potential future returns for shareholders

Question 12

Tiger Training Inc. has decided on a 4-for-1 stock split. If the firm currently has 1,600,000 shares outstanding, how many shares will be outstanding after the stock split?

Accepted Answer

A)   400,000 shares
B)   1,600,000 shares
C)   3,200,000 shares
D)   6,400,000 shares D

Question 13

Which of the following is NOT a reason used by the market as justification for a firm that engages in a stock split?

Accepted Answer

A)   The company wishes to keep their stock price in a preferred trading range.
B)   The company wants to pay dividends to more shareholders.
C)   The company wished to send a positive signal to the market.
D)   The company wishes to increase liquidity by making their stock easier to buy.

Question 14

Marcus owns 500 shares of Pharmacon Inc. The firm has a quarterly dividend policy of $0.50 per share or the option to reinvest the cash dividends into additional shares of company stock. If the stock is selling for $128.00 per share, how many shares of stock will Marcus receive in the next dividend period if he chooses the dividend reinvestment plan?

Accepted Answer

A)   0.78 shares
B)   1.25 shares
C)   1.95 shares
D)   16.21 shares

Question 15

Empirical evidence shows that a stock split is generally considered by the market to be ________.

Accepted Answer

A)   good news
B)   bad news
C)   not newsworthy
D)   This is a good question but it has not been empirically studied by financial economists.

Question 16

Plans that call for the automatic reinvestment of shareholder cash dividends in more shares of the company stock are called ________.

Accepted Answer

A)   DRIPs
B)   ACORNs
C)   STRIPs
D)   IPOs

Question 17

A policy of "sticky dividends," meaning one in which dividends tend to stick at newly raised levels, is used more frequently by firms than a residual dividend policy.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is NOT a form of corporate dividend?

Accepted Answer

A)   Regular cash dividend
B)   Special cash dividend
C)   Stock dividend
D)   These are all forms of corporate dividends.

Question 19

Identify and define three reasons for stock splits.

Accepted Answer

Although stock splits appear to have no ...

Question 20

Which of the following is NOT TRUE regarding dividend reinvestment plans (DRIPs) ?

Accepted Answer

A)   DRIPs avoid most or all transaction fees if administered directly by the company.
B)   By choosing a DRIPs option, a shareholder automatically buys additional shares of a company on a regular basis.
C)   DRIPs often allow investors to purchase a small number of shares per transaction.
D)   All of these statements about DRIPs are true.

Exam 17: Dividends, Dividend Policy, and Stock Splits

Legal capital can be thought of as the original contributions of the owners consisting of

Correct Answer
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Which of the following dividend policies would most likely have the greatest variability in actual dividends paid?

Correct Answer
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D

The final distribution of cash to shareholders after a company has been sold off or discontinued operations is called a ________ dividend.

Correct Answer
verified

Which of following is a reason for a low-dividend-payout policy?

Correct Answer
verified

Which of the following is NOT a common bondholder covenant?

Correct Answer
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C

After placing an order to buy or sell shares of stock through your broker, which of the following statements is true regarding the settlement date for the order?

Correct Answer
verified

Which of the following commonly stated reasons for stock splits has the weakest empirical evidence in support?

Correct Answer
verified

A firm will set its dividend policy high enough so that it can continually meet the distribution level of the cash dividend in spite of variances in cash inflow from operations and in cash outflows for maintenance and investing.

Correct Answer
verified

All investors want the maximum amount of dividends possible.

Correct Answer
verified

Low-dividend stocks are preferred by clients who prefer to delay taxes.

Correct Answer
verified

Which of the following is NOT a reason for a low-dividend-payout policy?

Correct Answer
verified

Tiger Training Inc. has decided on a 4-for-1 stock split. If the firm currently has 1,600,000 shares outstanding, how many shares will be outstanding after the stock split?

Correct Answer
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D

Which of the following is NOT a reason used by the market as justification for a firm that engages in a stock split?

Correct Answer
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Correct Answer
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Empirical evidence shows that a stock split is generally considered by the market to be ________.

Correct Answer
verified

Plans that call for the automatic reinvestment of shareholder cash dividends in more shares of the company stock are called ________.

Correct Answer
verified

A policy of "sticky dividends," meaning one in which dividends tend to stick at newly raised levels, is used more frequently by firms than a residual dividend policy.

Correct Answer
verified

Which of the following is NOT a form of corporate dividend?

Correct Answer
verified

Identify and define three reasons for stock splits.

Correct Answer
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Although stock splits appear to have no ...
View Answer

Which of the following is NOT TRUE regarding dividend reinvestment plans (DRIPs) ?

Correct Answer
verified

Exam 17: Dividends, Dividend Policy, and Stock Splits

Legal capital can be thought of as the original contributions of the owners consisting of

Correct AnswerverifiedShow Answer

Which of the following dividend policies would most likely have the greatest variability in actual dividends paid?

Correct AnswerverifiedD

The final distribution of cash to shareholders after a company has been sold off or discontinued operations is called a ________ dividend.

Correct AnswerverifiedShow Answer

Which of following is a reason for a low-dividend-payout policy?

Correct AnswerverifiedShow Answer

Which of the following is NOT a common bondholder covenant?

Correct AnswerverifiedC

After placing an order to buy or sell shares of stock through your broker, which of the following statements is true regarding the settlement date for the order?

Correct AnswerverifiedShow Answer

Which of the following commonly stated reasons for stock splits has the weakest empirical evidence in support?

Correct AnswerverifiedShow Answer

A firm will set its dividend policy high enough so that it can continually meet the distribution level of the cash dividend in spite of variances in cash inflow from operations and in cash outflows for maintenance and investing.

Correct AnswerverifiedShow Answer

All investors want the maximum amount of dividends possible.

Correct AnswerverifiedShow Answer

Low-dividend stocks are preferred by clients who prefer to delay taxes.

Correct AnswerverifiedShow Answer

Which of the following is NOT a reason for a low-dividend-payout policy?

Correct AnswerverifiedShow Answer

Tiger Training Inc. has decided on a 4-for-1 stock split. If the firm currently has 1,600,000 shares outstanding, how many shares will be outstanding after the stock split?

Correct AnswerverifiedD

Which of the following is NOT a reason used by the market as justification for a firm that engages in a stock split?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Empirical evidence shows that a stock split is generally considered by the market to be ________.

Correct AnswerverifiedShow Answer

Plans that call for the automatic reinvestment of shareholder cash dividends in more shares of the company stock are called ________.

Correct AnswerverifiedShow Answer

A policy of "sticky dividends," meaning one in which dividends tend to stick at newly raised levels, is used more frequently by firms than a residual dividend policy.

Correct AnswerverifiedShow Answer

Which of the following is NOT a form of corporate dividend?

Correct AnswerverifiedShow Answer

Identify and define three reasons for stock splits.

Correct AnswerverifiedAlthough stock splits appear to have no ...View AnswerShow Answer

Which of the following is NOT TRUE regarding dividend reinvestment plans (DRIPs) ?

Correct AnswerverifiedShow Answer

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D

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C

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D

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Although stock splits appear to have no ...
View Answer

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