Question 1

Which one of the following statements related to cash dividends is correct?

Accepted Answer

A)   Extra cash dividends cannot be repeated in the future.
B)   A dividend is never a liability until it has been declared.
C)   If a firm has paid regular quarterly dividends for at least five consecutive years it is legally obligated to continue doing so.
D)   Regular cash dividends reduce paid-in capital.
E)   The dividend yield expresses the annual dividend as a percentage of net income.F) C) and D)
G) B) and E)

Question 2

City Center Pharmacy has 11,500 shares of stock outstanding with a par value of $1 per share and a market value of $12 a share.The company just announced a 3-for-7 reverse stock split.What will the market value per share be after the reverse stock split?

Accepted Answer

A)   $5.14
B)   $12.00
C)   $23.33
D)   $28.00
E)   $33.14F) A) and E)
G) None of the above

Question 3

Which one of the following involves a payment in shares by a stock issuer that increases the number of shares a shareholder owns but also decreases the value per share?

Accepted Answer

A)   cash dividend
B)   stock dividend
C)   stock repurchase
D)   stock split
E)   reverse stock splitF) B) and E)
G) B) and D)

Question 4

The Mining Co.has 20,000 shares of stock outstanding.The current market value of the firm is $328,000.The company has retained earnings of $27,000,capital in excess of par value of $160,000,and a common stock account value of $40,000.The company is planning a 2-for-5 reverse stock split.What will the par value per share be after the split?

Accepted Answer

A)   $0.15
B)   $0.20
C)   $1.00
D)   $2.50
E)   $5.00F) B) and C)
G) A) and D)

Question 5

You are the CFO of a non-dividend paying firm that currently has excess cash reserves.You are preparing for an internal management meeting where dividends are on the agenda.You know that the CEO favors the commencement of a dividend program.You,however,oppose any dividend plan at this time.Write a good argument that you can use in the meeting to support your position.

Accepted Answer

While it is true that the firm currently...

Question 6

An investor is more likely to prefer a high dividend payout if a firm:

Accepted Answer

A)   has high flotation costs.
B)   has few,if any,positive net present value projects.
C)   has lower tax rates than the investor.
D)   has a stock price that is increasing rapidly.
E)   offers substantial gains on its equities,which are taxed at a favorable rate.F) C) and D)
G) B) and D)

Question 7

S.L.Moffatt,Inc.has paid a quarterly dividend of $1.20 per share for the last ten quarters.Which one of the following is most apt to cause the firm to reduce the amount of its next dividend payment?

Accepted Answer

A)   decrease in the next quarter's revenue
B)   decrease in the next quarter's net income
C)   loss of a major customer which lowers the firm's outlook for the next few years
D)   major lump sum cash outflow next month to settle a class action product liability lawsuit on a product that is no longer produced
E)   decrease in the number of new projects under consideration as compared to last yearF) C) and D)
G) A) and E)

Question 8

The ex-dividend date is defined as _____ business day(s) before the date of record.

Accepted Answer

A)   1
B)   2
C)   3
D)   5
E)   10F) A) and B)
G) B) and E)

Question 9

The common stock of Checkers,Inc.is selling for $56 a share and the par value per share is $1.Currently,the firm has a total market value of $812,000.How many shares of stock will be outstanding if the firm does a 3-for-2 stock split?

Accepted Answer

A)   9,667 shares
B)   12,500 shares
C)   14,500 shares
D)   17,750 shares
E)   21,750 sharesF) A) and C)
G) A) and D)

Question 10

The Tanning Bed has 10,000 shares of stock outstanding with a par value of $1 per share and a market value of $8 per share.The balance sheet shows $10,000 in the common stock account,$60,000 in the capital in excess of par account,and $94,300 in the retained earnings account.The firm just announced a 100 percent stock dividend.What will be the value of the common stock account after the dividend?

Accepted Answer

A)   $5,000
B)   $10,000
C)   $11,000
D)   $15,000
E)   $20,000F) B) and C)
G) A) and E)

Question 11

The common stock of Pierson Enterprises has historically had a high dividend yield and is expected to continue to do so.As a result,the majority of its shareholders are individuals and entities that are seeking a regular source of cash income.Most of these shareholders pay either no taxes or a relatively low amount of taxes.The fact that most of these shareholders have similar characteristics is referred to by which one of the following terms?

Accepted Answer

A)   information content effect
B)   clientele effect
C)   efficient markets hypothesis
D)   distribution effect
E)   market reaction effectF) B) and C)
G) A) and D)

Question 12

Purvis Lawn Products has 18,000 shares of stock outstanding at a market price of $5.50 a share.What will the market price per share be if the company does a 1-for-4 reverse stock split?

Accepted Answer

A)   $1.38
B)   $5.50
C)   $11.00
D)   $16.50
E)   $22.00F) A) and B)
G) B) and C)

Question 13

Delaware Trust has 450 shares of common stock outstanding at a market price per share of $27.Currently,the firm has excess cash of $400,total assets of $28,900,and net income of $1,320.The firm has decided to pay out all of its excess cash as a cash dividend.What will the earnings per share be after this dividend is paid?

Accepted Answer

A)   $2.69
B)   $2.86
C)   $2.93
D)   $3.07
E)   $3.24F) B) and D)
G) C) and E)

Question 14

Green Roof Motels has more cash on hand than its operations require.Thus,the firm has decided to pay out some of its earnings in the form of cash to its shareholders.What are these payments to shareholders called?

Accepted Answer

A)   dividends
B)   stock payments
C)   repurchases
D)   payments-in-kind
E)   stock splitsF) A) and D)
G) B) and C)

Question 15

A small stock dividend is defined as a stock dividend of less than _____ percent.

Accepted Answer

A)   10 to 15
B)   15 to 20
C)   20 to 25
D)   25 to 30
E)   30 to 35F) B) and C)
G) A) and B)

Question 16

On July 7,you purchased 500 shares of Wagoneer,Inc.stock for $21 a share.On August 1,you sold 200 shares of this stock for $28 a share.You sold an additional 100 shares on August 17 at a price of $25 a share.The company declared a $0.95 per share dividend on August 4 to holders of record as of Wednesday,August 15.This dividend is payable on September 1.How much dividend income will you receive on September 1 as a result of your ownership of Wagoneer stock?

Accepted Answer

A)   $0
B)   $190
C)   $285
D)   $360
E)   $475F) A) and C)
G) B) and C)

Question 17

You own 1,500 shares of stock in Avondale Corporation.You will receive a $0.80 per share dividend in one year.In two years,Avondale will pay a liquidating dividend of $35 per share.The required return on Avondale stock is 16 percent.You only want $200 total in dividends in year one and accomplish this by using homemade dividends.What will your total dividend amount be in year two?

Accepted Answer

A)   $35,696
B)   $40,764
C)   $53,660
D)   $61,402
E)   $63,878F) A) and B)
G) A) and C)

Question 18

Which one of the following statements is correct?

Accepted Answer

A)   Firms prefer to cut dividend payments rather than borrow money to fund a short-term cash need.
B)   Share repurchases tend to increase agency costs.
C)   Maintaining a steady dividend is a key goal of most dividend-paying firms.
D)   Tax rates are the key factor in determining a firm's dividend policy.
E)   Stock prices tend to ignore expected changes in dividend payments.F) B) and D)
G) A) and E)

Question 19

Which of the following account balance changes occur as a result of a large stock dividend?
I.increase in common stock
II.decrease in capital in excess of par
III.increase in capital in excess of par
IV.decrease in retained earnings

Accepted Answer

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

Question 20

Which one of the following favors a low dividend policy?

Accepted Answer

A)   the tax on capital gains is deferred until the gain is realized
B)   few,if any,positive net present value projects are available to a firm
C)   a majority of the shareholders has a low relevant tax rate
D)   a majority of the shareholders has better investment opportunities with similar risks
E)   corporate tax rates exceed personal tax ratesF) D) and E)
G) A) and B)

Exam 17: Dividends and Payout Policypart Seven: Short-Term Financial Planning and Management

Which one of the following involves a payment in shares by a stock issuer that increases the number of shares a shareholder owns but also decreases the value per share?

Correct Answer
verified

City Center Pharmacy has 11,500 shares of stock outstanding with a par value of $1 per share and a market value of $12 a share.The company just announced a 3-for-7 reverse stock split.What will the market value per share be after the reverse stock split?

Correct Answer
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Correct Answer
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While it is true that the firm currently...
View Answer

The ex-dividend date is defined as _____ business day(s) before the date of record.

Correct Answer
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Which of the following account balance changes occur as a result of a large stock dividend? I.increase in common stock II.decrease in capital in excess of par III.increase in capital in excess of par IV.decrease in retained earnings

Correct Answer
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Correct Answer
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Correct Answer
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Which one of the following statements related to cash dividends is correct?

Correct Answer
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Purvis Lawn Products has 18,000 shares of stock outstanding at a market price of $5.50 a share.What will the market price per share be if the company does a 1-for-4 reverse stock split?

Correct Answer
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Correct Answer
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Correct Answer
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An investor is more likely to prefer a high dividend payout if a firm:

Correct Answer
verified

Green Roof Motels has more cash on hand than its operations require.Thus,the firm has decided to pay out some of its earnings in the form of cash to its shareholders.What are these payments to shareholders called?

Correct Answer
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Which one of the following statements is correct?

Correct Answer
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Which one of the following favors a low dividend policy?

Correct Answer
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Correct Answer
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S.L.Moffatt,Inc.has paid a quarterly dividend of $1.20 per share for the last ten quarters.Which one of the following is most apt to cause the firm to reduce the amount of its next dividend payment?

Correct Answer
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A small stock dividend is defined as a stock dividend of less than _____ percent.

Correct Answer
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Correct Answer
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The common stock of Checkers,Inc.is selling for $56 a share and the par value per share is $1.Currently,the firm has a total market value of $812,000.How many shares of stock will be outstanding if the firm does a 3-for-2 stock split?

Correct Answer
verified

Exam 17: Dividends and Payout Policypart Seven: Short-Term Financial Planning and Management

Which one of the following involves a payment in shares by a stock issuer that increases the number of shares a shareholder owns but also decreases the value per share?

Correct AnswerverifiedShow Answer

City Center Pharmacy has 11,500 shares of stock outstanding with a par value of $1 per share and a market value of $12 a share.The company just announced a 3-for-7 reverse stock split.What will the market value per share be after the reverse stock split?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedWhile it is true that the firm currently...View AnswerShow Answer

The ex-dividend date is defined as _____ business day(s) before the date of record.

Correct AnswerverifiedShow Answer

Which of the following account balance changes occur as a result of a large stock dividend? I.increase in common stock II.decrease in capital in excess of par III.increase in capital in excess of par IV.decrease in retained earnings

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following statements related to cash dividends is correct?

Correct AnswerverifiedShow Answer

Purvis Lawn Products has 18,000 shares of stock outstanding at a market price of $5.50 a share.What will the market price per share be if the company does a 1-for-4 reverse stock split?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An investor is more likely to prefer a high dividend payout if a firm:

Correct AnswerverifiedShow Answer

Green Roof Motels has more cash on hand than its operations require.Thus,the firm has decided to pay out some of its earnings in the form of cash to its shareholders.What are these payments to shareholders called?

Correct AnswerverifiedShow Answer

Which one of the following statements is correct?

Correct AnswerverifiedShow Answer

Which one of the following favors a low dividend policy?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

S.L.Moffatt,Inc.has paid a quarterly dividend of $1.20 per share for the last ten quarters.Which one of the following is most apt to cause the firm to reduce the amount of its next dividend payment?

Correct AnswerverifiedShow Answer

A small stock dividend is defined as a stock dividend of less than _____ percent.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The common stock of Checkers,Inc.is selling for $56 a share and the par value per share is $1.Currently,the firm has a total market value of $812,000.How many shares of stock will be outstanding if the firm does a 3-for-2 stock split?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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While it is true that the firm currently...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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