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Lester's Meat Market has 7,000 shares of stock outstanding at a price per share of $11. What will the price per share be if the firm declares a 3-for-5 reverse stock split?


A) $6.60
B) $7.50
C) $11.00
D) $15.00
E) $18.33

F) B) and E)
G) A) and B)

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What is the difference between a tender offer and a targeted repurchase?

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A tender offer is an offer by an issuer ...

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Cookies and More has 8,000 shares of stock outstanding at a market price of $13.60 per share. What will the price per share be after the firm declares a 10 percent stock dividend? Ignore taxes and market imperfections.


A) $12.24
B) $12.36
C) $13.60
D) $14.96
E) $15.00

F) C) and D)
G) B) and E)

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Which one of the following would tend to favor a low dividend payout?


A) Higher tax rates on capital gains than on dividend income
B) High flotation cost for equity issues
C) Endowment fund investors who cannot spend principal
D) Investors' desire for a high dividend yield
E) Elimination of the tax-deferral on capital gains

F) All of the above
G) B) and E)

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B

Tuesday, December 1, is the ex-dividend date for Alpha stock. Which one of the following dates is the record date? Assume there are no banking holidays to consider.


A) Friday, November 27
B) Monday, November 30
C) Wednesday, December 2
D) Thursday, December 3
E) Friday, December 4

F) A) and C)
G) A) and E)

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Which one of the following will result from a stock repurchase?


A) Increase in the number of shares outstanding
B) Decrease in the earnings per share
C) Decrease in the market price per share
D) Increase in the market value of equity per share
E) Decrease in the P/E ratio

F) C) and D)
G) B) and E)

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Which one of the following is the date on which the board of directors agrees to pay a dividend and passes a resolution to do so?


A) Date of record
B) Ex-dividend date
C) Payment date
D) Declaration date
E) Public announcement date

F) A) and B)
G) B) and C)

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LOG, Inc. currently has 300,000 shares of stock outstanding that sell for $73 per share. Assuming no market imperfections or tax effects exist, what will the share price be after LOG has a five-for-three stock split?


A) $43.80
B) $45.60
C) $73.00
D) $109.18
E) $121.67

F) A) and B)
G) None of the above

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A

Kaylor's Tool Shoppe has 16,000 shares of stock outstanding at a market price of $2 a share. Which one of the following stock splits should the firm declare if it wants to increase the stock price to exactly $15 a share? Ignore any taxes or market imperfections.


A) 15-for-2 stock split
B) 8-for-1 stock split
C) 1-for-7-reverse stock stock split
D) 2-for-15 reverse stock split
E) 1-for-8 reverse stock split

F) A) and B)
G) A) and C)

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Global Traders has common stock outstanding at a market price of $53 per share. The total market value of the firm is $6,603,800. The firm plans on liquidating one of its divisions for $548,000 in cash and distributing the proceeds to the shareholders in the form of a liquidating dividend. What will be the amount per share of that dividend?


A) $4.197
B) $4.398
C) $4.620
D) $4.714
E) $4.782

F) C) and E)
G) C) and D)

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Which one of the following statements related to stock buybacks is correct?


A) Stock buybacks are a means of obtaining shares for employee stock option grants.
B) Stock buybacks are becoming rare and may soon disappear totally.
C) In 2007 and 2008, U.S. companies issued more shares than they repurchased.
D) Firms are only permitted one large share repurchase program.
E) Share repurchases are limited to 10 percent of the firm's outstanding shares.

F) All of the above
G) A) and E)

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Lester's Dry Goods paid $1.10 per share in dividends last year. The company currently has excess cash and would like to distribute $0.40 a share to its shareholders. However, the company is concerned about increasing the dividend by that amount as it will not be able to afford any increase in the future and doesn't want to lower the dividend once it has been raised. Which one of the following is probably the best suggestion for distributing the $0.40 per share?


A) Special dividend of $0.40 per share
B) Extra cash dividend of $0.40 per share
C) Liquidating dividend of $0.40 per share
D) Increase the regular dividend by $0.11 and pay a special dividend of $0.29
E) Increase the regular dividend by $0.11 and pay an extra cash dividend of $0.29

F) B) and D)
G) A) and B)

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Which one of the following is an example of a liquidating dividend?


A) Valley Feed Mills recently sold its grain storage facility and is distributing the proceeds of that sale to its shareholders.
B) Kate's Winery has excess cash that it wishes to distribute to its shareholders in addition to its normal cash dividend. This extra distribution usually occurs about once every year.
C) Kurt's Music is planning to increase its quarterly dividend by three percent.
D) The Dried Florist is preparing to pay its first annual dividend of $0.08 per share.
E) Hi Tek had an extraordinarily profitable year and has decided to do a one-time only $10 per share cash dividend.

F) None of the above
G) C) and E)

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A

Which one of the following tends to be the primary attitude of firms' towards their dividend policy?


A) Dividends should be increased annually no matter what.
B) Dividends should be flexible and adjusted annually in response to changes in the firm's earnings.
C) The costs associated with cutting dividends are perceived to be less than the costs of obtaining external financing.
D) Once a dividend is increased, it should not be decreased.
E) Dividend smoothing is talked about but is not really a factor that affects dividend decisions.

F) A) and D)
G) A) and B)

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Which one of the following statements is correct?


A) Generally speaking, the size of a firm has no effect on its tendency to pay dividends.
B) The market crash and the accounting scandals in the early 2000's tended to cause financially- stable firms to cease paying cash dividends.
C) The majority of firms either started paying or increased their dividends per share in response to the May 2003 change in dividend taxation.
D) Firms tend to prefer cash dividends over share repurchases for their flexibility and tax benefits.
E) A non-dividend paying firm is more apt to do a stock repurchase than to commence paying dividends.

F) B) and C)
G) None of the above

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Phil is reviewing ABC Company's dividend policy as it relates to the firm's shareholders. As part of this review, he wants to divide shareholders into two basic categories in respect to dividend payments. The first group will be shareholders who are taxed on dividend income and the second group will be shareholders who receive some form of tax break on dividend income. Which of the following types of shareholders should be placed in the tax-favored second group? I. corporate II) pension fund III) individuals IV) trust funds


A) I only
B) III only
C) I and III only
D) II and IV only
E) I, II, and IV only

F) A) and C)
G) All of the above

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Joseph Turner and Sons has 125,000 shares of stock outstanding. The firm has extra cash so it announced this morning that it is willing to repurchase 25,000 of its shares. What type of offer is the firm making?


A) Rights offer
B) Secondary issue
C) Targeted repurchase
D) Tender offer
E) Private issue

F) A) and B)
G) C) and E)

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Jerri currently owns 200 shares of Alpha stock. Each share is currently worth $36. What will Jerri's investment in Alpha be worth if the company declares a 4-for-3 stock dividend?


A) $5,400
B) $7,200
C) $9,000
D) $21,600
E) $28,800

F) B) and E)
G) None of the above

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Cash dividends send which two of the following signals to the market? I. agency costs will be lowered since less cash will be held by the firm II) the firm is planning on downsizing III) the firm is currently, and expects to continue to be, profitable IV) the firm will no longer conduct stock repurchases


A) I and II only
B) II and III only
C) III and IV only
D) II and IV only
E) I and III only

F) D) and E)
G) All of the above

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What are the differences between a regular cash dividend, a liquidating dividend, a special dividend, and an extra cash dividend?

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Cash dividend: Regular dividend, general...

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