Finance > QUESTIONS & ANSWERS > FINANCE E231 Payout Policy-ch14 Chapter 13 Dividend Policy Multiple Choice Questions WITH VERIFIED A (All)

FINANCE E231 Payout Policy-ch14 Chapter 13 Dividend Policy Multiple Choice Questions WITH VERIFIED ANSWERS.100% SCORE

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Chapter 13 Dividend Policy .1  .2  Multiple Choice Questions 1. At a firm’s quarterly dividend meeting held April 9, the directors declared a $0.50 per share cash dividend for the holders of record on Monday, May 1. The firm’s stock will sell exdividends on (a) April 9. (b) May 5. (c) April 25. (d) April 27. Answer: D Level of Difficulty: 1 Learning Goal: 1 Topic: Relevant Dividend Dates 2. Stockholders dislike dividends that (a) are fixed. (b) fluctuate with earnings. (c) are continuous. (d) increase. Answer: B 3. The payment of cash dividends to corporate stockholders is decided by the (a) management.15 Gitman • Principles of Finance, Eleventh Edition (b) stockholders. (c) SEC. (d) board of directors. Answer: D Level of Difficulty: 2 Learning Goal: 1 Topic: Dividend Payment Procedures 4. Paying a stock dividend _________ the retained earnings account. (a) decreases (b) has no effect on (c) increases (d) reorganizes Answer: A Level of Difficulty: 2 Learning Goal: 1 Topic: Stock Dividends 5. A dividend reinvestment plan _________ on the security. (a) decreases the return (b) has no effect on the return (c) increases the return (d) has an undetermined effect Answer: C Level of Difficulty: 2 Learning Goal: 1 Topic: Dividend Reinvestment PlansChapter 13 Dividend Policy 16 6. A dividend reinvestment plan enables stockholders to (a) reinvest the dividends in money market instruments which are risk free. (b) reinvest all dividends in the firm with no accompanying increase in equity. (c) acquire additional dividends through redemption of stock. (d) acquire shares at little or no transaction costs. Answer: D Level of Difficulty: 2 Learning Goal: 1 Topic: Dividend Reinvestment Plans 7. The residual theory of dividends suggests that dividends are _________ to the value of the firm. (a) residual (b) relevant (c) irrelevant (d) integral Answer: C Level of Difficulty: 2 Learning Goal: 2 Topic: Residual Theory of Dividends 8. The information content of dividends refers to (a) nonpayment of dividends by corporations. (b) dividend changes as indicators of a firm’s future. (c) a stable and continuous dividend. (d) a dividend paid as a percent of current earnings. Answer: B Level of Difficulty: 2 Learning Goal: 2 Topic: Informational Content of Dividends 9. According to the residual theory of dividends, if the firm’s equity need exceeds the amount of retained earnings, the firm would (a) borrow to pay the cash dividend. (b) sell additional stock to pay the cash dividend. (c) pay no cash dividends. (d) not need to consider its dividend policy. Answer: C Level of Difficulty: 3 Learning Goal: 2 Topic: Residual Theory of Dividends17 Gitman • Principles of Finance, Eleventh Edition 10. According to the residual theory of dividends, if the firm’s equity need is less than the amount of retained earnings, the firm would (a) borrow to pay the cash dividend. (b) declare a dividend equal to the remaining balance. (c) pay no cash dividends. (d) not need to consider its dividend policy. Answer: B Level of Difficulty: 3 Learning Goal: 2 Topic: Residual Theory of Dividends 11. Dividend policy is a form of (a) capital budgeting poli

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