Documente Academic
Documente Profesional
Documente Cultură
Dividend Policy
.2
1.
Theresidualtheoryofdividendssuggeststhatdividendsare_________tothevalueofthefirm.
(a) residual
(b) relevant
(c) irrelevant
(d) integral
Answer: C
2.
Theinformationcontentofdividendsrefersto
(a) nonpaymentofdividendsbycorporations.
(b) dividendchangesasindicatorsofafirmsfuture.
(c) astableandcontinuousdividend.
(d) adividendpaidasapercentofcurrentearnings.
Answer: B
3.
Accordingtotheresidualtheoryofdividends,ifthefirmsequityneedexceedstheamountof
retainedearnings,thefirmwould
(a) borrowtopaythecashdividend.
(b) selladditionalstocktopaythecashdividend.
(c) paynocashdividends.
(d) notneedtoconsideritsdividendpolicy.
Answer: C
4.
Accordingtotheresidualtheoryofdividends,ifthefirmsequityneedislessthantheamountof
retainedearnings,thefirmwould
(a) borrowtopaythecashdividend.
(b) declareadividendequaltotheremainingbalance.
(c) paynocashdividends.
(d) notneedtoconsideritsdividendpolicy.
Answer: B
5.
Theclienteleeffectrefersto
(a) therelevanceofdividendpolicyonsharevalue.
(b) thefirmsabilitytoattractstockholderswhosedividendpreferencesaresimilartothefirms
dividendpolicy.
(c) theinformationalcontentofdividends.
(d) thebirdinthehandargument.
Answer: B
6.
ModiglianiandMillersuggestthatthevalueofthefirmisnotaffectedbythefirmsdividendpolicy,
dueto
(a) therelevanceofdividends.
(b) theclienteleeffect.
(c) theinformationalcontent.
(d) theoptimalcapitalstructure.
Answer: B
7.
ModiglianiandMiller,recognizingthatdividendsdosomehowaffectstockprices,suggestthat
positiveeffectsofdividendincreasesareattributable
(a) directlytothedividendpolicy.
(b) directlytotheoptimalcapitalstructure.
(c) nottotheinformationalcontentbuttotheconsistencyinthepaymentofdividends.
(d) nottothedividenditselfbuttotheinformationalcontentofthedividendswithrespecttofuture
earnings.
Answer: D
8.
ModiglianiandMillerarguethatwhenthefirmhasnoacceptableinvestmentopportunities,it
should
(a) closeitsdoors.
(b) distributetheunneededfundstotheowners.
(c) loweritscostofcapital.
(d) retainthefundsuntilanacceptableprojectarises.
Answer: B
9.
Gordonsbirdinthehandargumentsuggeststhat
(a) dividendsareirrelevant.
(b) firmsshouldhavea100percentpayoutpolicy.
(c) shareholdersaregenerallyriskaverseandattachlessrisktocurrentdividends.
(d) themarketvalueofthefirmisunaffectedbydividendpolicy.
Answer: C
10.
Proponentsofthedividendirrelevancetheoryarguethat,allelsebeingequal,aninvestorsrequired
returnandthevalueofthefirmareunaffectedbydividendpolicy,forallofthefollowingreasons,
EXCEPT
(a) thefirmsvalueisdeterminedsolelybytheearningpowerandriskofitsassets.
(b) investorsaregenerallyriskaverseandattachlessrisktocurrentasopposedtofuturedividends
orcapitalgains.
(c) ifdividendsdoaffectvalue,theydososolelybecauseoftheirinformationcontent,which
signalsmanagementsearningsexpectations.
(d) aclienteleeffectexistswhichcausesafirmsshareholderstoreceivethedividendsthatthey
expect.
Answer: B
11.
ThefactorsinvolvedinsettingadividendpolicyincludeallofthefollowingEXCEPT
(a) restrictivecovenantsinabondindenture.
(b) growthprospects.
(c) thelegalprohibitiononpayingdividendswhichexceedcurrentearnings.
(d) capitalimpairmentrestrictions.
Answer: C
12.
Thedividendpolicymustbeformulatedconsideringtwobasicobjectives,namely
(a) delayingthetaxliabilityofthestockholderandinformationcontent.
(b) maximizingshareholderwealthanddelayingthetaxliabilityofthestockholder.
(c) maximizingshareholderwealthandprovidingforsufficientfinancing.
(d) maintainingliquidityandminimizingtheweightedaveragecostofcapital.
Answer: C
13.
Theproblemwithaconstantpayoutratiodividendpolicyfromtheshareholdersperspectiveisthat
(a) itborestheshareholders.
(b) ifthefirmsearningsdrop,sodoesthedividendpayment.
(c) evenwhenearningsarelow,thecompanymustpayafixeddividend.
(d) thereisnoinformationalcontent.
Answer: B
14.
Theproblemwiththeregulardividendpolicyfromthefirmsperspectiveisthat
(a) itborestheshareholders.
(b) ifthefirmsearningsdrop,sodoesthedividendpayment.
(c) evenwhenearningsarelow,thecompanymustpayafixeddividend.
(d) itincreasestheshareholdersuncertainty.
Answer: C
15.
Theadvantageofusingthelowregularandextradividendpolicyisthat
(a) thefirmavoidsgivingtheshareholdersfalsehopes.
(b) ifthefirmsearningsdrop,sodoesthedividendpayment.
(c) theextradividendmaybecomearegularevent.
(d) cyclicalshiftsinearningsmaybeavoided.
Answer: A
16.
Afirmhashadthefollowingearningshistoryoverthelastfiveyears:
Year
2003
2002
2001
2000
1999
EarningsperShare
$2.50
2.00
1.75
1.25
1.00
Ifthefirmsdividendpolicyisbasedona$0.50payoutpershare,increasingby$0.25pershare
wheneverearningsexceed$1.50pershare,theannualdividendsfor1999and2002were
(a) $0.00and$2.00,respectively.
(b) $0.50and$0.75,respectively.
(c) $0and$0.75,respectively.
(d) $0.50and$0.55,respectively.
Answer: C
17.
Afirmhashadthefollowingearningshistoryoverthelastfiveyears:
Year
2003
2002
2001
2000
1999
EarningsperShare
$2.50
2.00
1.75
1.25
1.00
Ifthefirmsdividendpolicywasbasedonaconstantpayoutratioof50percentforalloftheyears
withearningsover$1.50pershareandazeropayoutotherwise,theannualdividendsfor1999and
2002were
(a) $0.50and$1.25,respectively.
(b) $0and$2.00,respectively.
(c) $0and$1.25,respectively.
(d) $0and$1.00,respectively.
Answer: D
18.
Afirmhashadthefollowingearningshistoryoverthelastfiveyears:
Year
2003
2002
2001
2000
1999
EarningsperShare
$2.50
2.00
1.75
1.25
1.00
Ifthefirmsdividendpolicywastopay$0.25pershareeachperiodexceptwhenearningsexceed
$1.50,whenanextradividendequalto50percentoftheearningsabove$1.50wouldbepaid,the
annualdividendsfor2000and2002were
(a) $0.25and$1.25,respectively.
(b) $0.25and$0.75,respectively.
(c) $0and$0.25,respectively.
(d) $0.25and$0.50,respectively.
Answer: D
19.
Theshareholderreceivingastockdividendreceives
(a) ashareofcommonstockofequalvaluetotheirexistingsharesofcommonstock.
(b) cash.
(c) additionalsharesofcommonstockandcash.
(d) nothingofvalue.
Answer: D
20.
Thepurposeofastocksplitisto
(a) affectthefirmscapitalstructure.
(b) decreasethedividend.
(c) enhancethetradingactivityofthestockbyloweringthemarketprice.
(d) increasethemarketpriceofthestock.
Answer: C
21.
Astocksplithas_________effectonthefirmscapitalstructure.
(a) little
(b) no
(c) ameasurable
(d) adetrimental
Answer: B
22.
Thepurposeofareversestocksplitisto
(a) issueadditionalshares.
(b) increasethedividend.
(c) increasethepriceofstock.
(d) reducetradingactivity.
Answer: C
23.
StockrepurchasesaremadeforallofthefollowingreasonsEXCEPT
(a) toobtainsharestobeusedinacquisition.
(b) toretireoutstandingissues.
(c) tohavesharesavailableforstockoptionplans.
(d) todecreasethebookvalueofequity.
Answer: D
24.
Whencommonstockisrepurchasedandretired,theunderlyingmotiveisto
(a) delaytaxes.
(b) boostthestocksdividends.
(c) distributetheexcesscashtotheowners.
(d) reducetheretainedearningsbalance.
Answer: C
25.
Therepurchaseofstock_________theearningspershareand_________themarketpriceofstock.
(a) increases;increases
(b) decreases;decreases
(c) increases;decreases
(d) decreases;increases
Answer: A
26.
StockrepurchasesmaybemadeforallofthefollowingreasonsEXCEPT
(a) toenhanceshareholdervaluebyreducingthenumberofsharesoutstandingandtherebyraising
earningspershare.
(b) tohelpdiscourageanunfriendlytakeoverbyreducingthenumberofpubliclytradedshares.
(c) tomakesharesavailableforstockoptionplans.
(d) tomakesharesavailableforstockdividends.
Answer: D
27.
Whenpurchasingoutstandingsharesofcommonstockafirmcanutilizeallofthefollowing
methodsEXCEPT
(a) purchaseontheopenmarketatmarketprices.
(b) withatenderofferatvaryingprices.
(c) withatenderofferataspecifiedprice.
(d) bypurchasingalargeblockonanegotiatedbasis.
Answer: B
28.
Theneteffectofastockrepurchaseis
(a) similartothepaymentofastockdividend.
(b) similartoacashdividend.
(c) similartoastocksplit.
(d) similartoareversestocksplit.
Answer: B
29.
Enhancementofshareholdervaluethroughstockrepurchaseisachievedby
(a) reducingthenumberofsharesoutstandingandtherebyraisingearningspershare.
(b) sendingapositivesignaltoinvestorsinthemarketplacethatmanagementbelievesthatthestock
isundervalued.
(c) providingatemporaryfloorforthestockprice,whichmayhavebeendeclining.
(d) alloftheabove.
Answer: D
30.
AtthequarterlymeetingofTangshanMiningCorporation,heldonSeptember10th,thedirectors
declareda$1.00persharedividendforthefirms100,000sharesofcommonstockoutstanding.The
neteffectofdeclaringandpayingthisdividendwouldbeto
(a)
(b)
(c)
(d)
decreasetotalassetsby$100,000andincreasestockholdersequityby$100,000.
decreasetotalassetsby$100,000anddecreasestockholdersequityby$100,000.
increasetotalassetsby$100,000andincreasestockholdersequityby$100,000.
increasetotalassetsby$100,000anddecreasestockholdersequityby$100,000.
Answer: B
31.
AsaresultoftheJobsandGrowthTaxReliefReconciliationActof2003,earlystudiesshowedthat
thepercentageoffirmspayingquarterlydividends
(a) increased.
(b) decreased.
(c) didnotchange.
(d) noneoftheabove.
Answer: A
32.
Whichtypeofdividendpaymentpolicyhastheadvantagethatifthefirmsearningsdrop,dividends
willstillbemaintainedatarelativelyconstantlevel?
(a) Constantpayoutratiopolicy.
(b) Regulardividendpolicy.
(c) Lowregularandextradividendpolicy.
(d) noneoftheabove.
Answer: B
33.
TangshanMininghas100,000sharesoutstandingandjustdeclareda15percentstockdividend.
Beforetheannouncement,thefirmssharesweretradingat$50.00pershare.Afterthestock
dividend,thefirmssharesshouldtradeat_________pershare.
(a) $40.00
(b) $41.66
(c) $43.48
(d) remainunchanged
Answer: C
34.
TangshanMininghas100,000sharesoutstandingandjustdeclareda2for1stocksplit.Beforethe
announcement,thefirmssharesweretradingat$50.00pershare.Afterthestockdividend,the
firmssharesshouldtradeat_________pershare.
(a) $100.00
(b) $25.00
(c) $50.00
(d) noneoftheabove.
Answer: B
35.
TangshanMininghas100,000sharesoutstandingandjustdeclareda3for2stocksplit.Beforethe
announcement,thefirmssharesweretradingat$50.00pershare.Afterthestockdividend,the
firmssharesshouldtradeat_________pershare.
(a) $33.33
(b) $50.00
(c) $75.00
(d) noneoftheabove.
Answer: A
36.
Thefirms_________isthemixoflongtermdebtandequityutilizedbythefirm,whichmay
significantlyaffectitsvaluebyaffectingreturnandrisk.
(a) dividendpolicy
(b) capitalbudget
(c) capitalstructure
(d) workingcapital
Answer: C