Question 1

Xian Inc.has 7,000,000 shares outstanding.If the company declares a 3 for 2 reverse stock split,determine the number of shares outstanding afterwards.

Accepted Answer

A)   10,050,000
B)   10,080,000
C)   10,200,000
D)   10,220,000

Question 2

A two-for-one stock split is like a 200% stock dividend.

Accepted Answer

A) True 
 B)False

Question 3

Anyone holding a stock before its ex-dividend date is entitled to the dividend.

Accepted Answer

A) True 
 B)False

Question 4

A 100% stock dividend results in a doubling of the number of outstanding shares,but they do not affect the company's assets,profits,or total value.

Accepted Answer

A) True 
 B)False

Question 5

A company may choose to repurchase stock rather than pay out dividends when:

Accepted Answer

A)   the company wants to distribute excess cash to its investors.
B)   the company wants to give its investors a bumper dividend.
C)   the company does not want to make a commitment to distribute more cash.
D)   the company does not want to embark on unprofitable ventures.

Question 6

Which of the following statements is correct about investors in Ajax Industries,which has just announced a three-for-one stock split?

Accepted Answer

A)   investors will triple their wealth after the split
B)   investors' wealth will fall by two-thirds after the split
C)   %age of ownership increases for the investors
D)   earnings per share will fall by two-thirds after the split

Question 7

Managers have been characterized as reluctant to increase dividends if:

Accepted Answer

A)   dividends were increased in the preceding year.
B)   earnings have permanently increased.
C)   the dividend increase cannot be sustained.
D)   the dividend payout ratio exceeds 20%.

Question 8

A stock split and/or a stock dividend will result in an:

Accepted Answer

A)   increase in the number of shares outstanding.
B)   increase in the market value of the firm.
C)   increase in the total assets of the firm.
D)   increase in both the number of shares outstanding and the total assets of the firm.

Question 9

A dividend clientele effect assumes that:

Accepted Answer

A)   investors prefer higher rather than lower dividends.
B)   shareholders are indifferent regarding dividends.
C)   investors have specific dividend preferences.
D)   investors are making "homemade" dividends.

Question 10

With respect to the dividend-payment process,the price of a share of stock can logically be expected to drop on:

Accepted Answer

A)   the payment date.
B)   the date of record.
C)   the ex-dividend date.
D)   the declaration date.

Question 11

Which of the following is the order in which key dividend dates occur:

Accepted Answer

A)   declaration, with-dividend, record, ex-dividend, payment.
B)   declaration, with-dividend, ex-dividend, record, payment.
C)   record, declaration, with-dividend, payment, ex-dividend.
D)   with-dividend, ex-dividend, record, declaration, payment.

Question 12

XYZ Corp.has 1,000 shares outstanding and retained earnings of $25,000.Theoretically,what would you expect to happen to the price of their stock,currently selling for $30 per share,if a 25% stock dividend is declared?

Accepted Answer

A)   price should increase to $44.00 per share.
B)   price should increase to $37.50 per share.
C)   price should decrease to $24.00 per share.
D)   nothing; price should remain at $30.00.

Question 13

How will your investment in Acme Corp.change if you currently own 100 shares valued at $10 each and Acme has just declared a 10% stock dividend? Before the stock dividend there were 2,000 shares outstanding.

Accepted Answer

Before the stock dividend your ownership...

Question 14

List several advantages and disadvantages of dividend reinvestment plans and stock repurchase plans.

Accepted Answer

Some advantages include:
> Savings to in...

Question 15

Capital gains may be preferred by investors over dividends even if their tax rates are equal because:

Accepted Answer

A)   taxes on dividends are withheld from paycheques.
B)   taxes on capital gains are paid annually.
C)   taxes on capital gains can be timed.
D)   after-tax dividends are less certain than capital gains.

Question 16

When a company expects to maintain its dividend payments in the future,it will issue:

Accepted Answer

A)   regular dividends.
B)   special dividends.
C)   stock dividends.
D)   extra dividends.

Question 17

A dividend does not accompany stocks that are purchased on the ex-dividend date.

Accepted Answer

A) True 
 B)False

Question 18

High dividends may be used as __________ of a firm's __________.

Accepted Answer

A)   an indicator; high capital gains
B)   an indicator; tax liability
C)   a signal; return on equity
D)   a signal; good prospects

Question 19

Corporations pay regular cash dividends to their:

Accepted Answer

A)   common shareholders.
B)   preferred bondholders.
C)   fixed-rate bondholders.
D)   convertible bondholders.

Question 20

Global Inc.'s shares are selling for $36 per share.Determine the new price per share,if the company a 4 for 6 reverse stock split.

Accepted Answer

A)   $54
B)   $44
C)   $34
D)   $24

Exam 18: Payout Policy

Managers have been characterized as reluctant to increase dividends if:

Correct AnswerverifiedShow Answer

How will your investment in Acme Corp.change if you currently own 100 shares valued at $10 each and Acme has just declared a 10% stock dividend? Before the stock dividend there were 2,000 shares outstanding.

Correct AnswerverifiedBefore the stock dividend your ownership...View AnswerShow Answer

A 100% stock dividend results in a doubling of the number of outstanding shares,but they do not affect the company's assets,profits,or total value.

Correct AnswerverifiedShow Answer

Which of the following is the order in which key dividend dates occur:

Correct AnswerverifiedShow Answer

Capital gains may be preferred by investors over dividends even if their tax rates are equal because:

Correct AnswerverifiedShow Answer

A two-for-one stock split is like a 200% stock dividend.

Correct AnswerverifiedShow Answer

A dividend clientele effect assumes that:

Correct AnswerverifiedShow Answer

Corporations pay regular cash dividends to their:

Correct AnswerverifiedShow Answer

XYZ Corp.has 1,000 shares outstanding and retained earnings of $25,000.Theoretically,what would you expect to happen to the price of their stock,currently selling for $30 per share,if a 25% stock dividend is declared?

Correct AnswerverifiedShow Answer

Global Inc.'s shares are selling for $36 per share.Determine the new price per share,if the company a 4 for 6 reverse stock split.

Correct AnswerverifiedShow Answer

A stock split and/or a stock dividend will result in an:

Correct AnswerverifiedShow Answer

Xian Inc.has 7,000,000 shares outstanding.If the company declares a 3 for 2 reverse stock split,determine the number of shares outstanding afterwards.

Correct AnswerverifiedShow Answer

When a company expects to maintain its dividend payments in the future,it will issue:

Correct AnswerverifiedShow Answer

High dividends may be used as __________ of a firm's __________.

Correct AnswerverifiedShow Answer

List several advantages and disadvantages of dividend reinvestment plans and stock repurchase plans.

Correct AnswerverifiedSome advantages include:> Savings to in...View AnswerShow Answer

Which of the following statements is correct about investors in Ajax Industries,which has just announced a three-for-one stock split?

Correct AnswerverifiedShow Answer

With respect to the dividend-payment process,the price of a share of stock can logically be expected to drop on:

Correct AnswerverifiedShow Answer

Anyone holding a stock before its ex-dividend date is entitled to the dividend.

Correct AnswerverifiedShow Answer

A dividend does not accompany stocks that are purchased on the ex-dividend date.

Correct AnswerverifiedShow Answer

A company may choose to repurchase stock rather than pay out dividends when:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Before the stock dividend your ownership...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

High dividends may be used as of a firm's .

Correct Answer
verified

Correct Answer
verified
Some advantages include:
> Savings to in...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified