Financial Management - Chapter 17 Dividends and Payout Policy

Chapter 17 Dividends and Payout Policy

 

1.

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?    A.  dividends B.  stock payments C.  repurchases D.  payments-in-kind E.  stock splits Refer to section 17.1

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-01 Dividend types and how dividends are paid. Section: 17.1 Topic: Dividend

2.

Lester's Frozen Foods just paid out $0.50 a share to its shareholders. The cash for these payments came from a large sale of assets, not from any earnings of the firm. What are these payments to shareholders called?    A.  dividends B.  distributions C.  repurchases D.  payments-in-kind E.  stock splits Refer to section 17.1

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-01 Dividend types and how dividends are paid. Section: 17.1 Topic: Distribution

3.	A $0.60 quarterly cash payment paid by T.L. Jones & Co. to its shareholders in the normal course of business is called a:    A.  repurchase. B.  liquidating dividend. C.  regular cash dividend. D.  special dividend. E.  extra cash dividend. Refer to section 17.1

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-01 Dividend types and how dividends are paid. Section: 17.1 Topic: Regular cash dividend

4.

The board of directors of Wilson Sporting Equipment met this afternoon and passed a resolution to pay a cash dividend of $0.42 a share next month. In relation to this dividend, today is referred to as which one of the following dates?    A.  decision date B.  date-of-record C.  declaration date D.  payment date E.  ex-dividend date Refer to section 17.1

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-01 Dividend types and how dividends are paid. Section: 17.1 Topic: Declaration date

5.	The ex-dividend date is defined as _____ business day(s) before the date of record.    A.  1 B.  2 C.  3 D.  5 E.  10 Refer to section 17.1

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-01 Dividend types and how dividends are paid. Section: 17.1 Topic: Ex-dividend date

6.	Which one of the following dates is used to determine the names of shareholders who will receive a dividend payment?    A.  ex-rights date B.  ex-dividend date C.  date of record D.  date of payment E.  declaration date Refer to section 17.1

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-01 Dividend types and how dividends are paid. Section: 17.1 Topic: Date of record

7.	Dividend payments are mailed on which one of the following dates?    A.  ex-rights date B.  ex-dividend date C.  date of record D.  date of payment E.  declaration date Refer to section 17.1

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-01 Dividend types and how dividends are paid. Section: 17.1 Topic: Date of payment

8.

Which one of the following refers to the ability of shareholders to undo a firm's dividend policy and create an alternative dividend policy by reinvesting dividends or selling shares of stock?    A.  perfect foresight model B.  personalization C.  recapitalization D.  offsetting leverage E.  homemade dividend policy Refer to section 17.2

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-02 The issues surrounding dividend policy decisions. Section: 17.2 Topic: Homemade dividend policy

9.

What is the information content effect?    A.  any type of new information that causes a firm to cease paying dividends B.  any news announcement that was anticipated and thus produces no reaction from investors C.  the primary contributing data that helps directors determine the amount of a particular dividend payment D.  any type of reaction from a shareholder in response to a news announcement related to the stock issuer E.  the financial market's reaction to a change in the amount of a firm's dividend Refer to section 17.5

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-02 The issues surrounding dividend policy decisions. Section: 17.5 Topic: Information content effect

10.

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?    A.  information content effect B.  clientele effect C.  efficient markets hypothesis D.  distribution effect E.  market reaction effect Refer to section 17.5

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-02 The issues surrounding dividend policy decisions. Section: 17.5 Topic: Clientele effect

11.	HJ Corporation has excess cash and has opted to buy some of its shares of outstanding common stock. What is this process of buying called?    A.  stock dividend B.  stock split C.  stock repurchase D.  stock recap E.  stock repeal Refer to section 17.6

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-04 Why share repurchases are an alternative to dividends. Section: 17.6 Topic: Stock repurchase

12.	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?    A.  cash dividend B.  stock dividend C.  stock repurchase D.  stock split E.  reverse stock split Refer to section 17.8

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-03 The difference between cash and stock dividends. Section: 17.8 Topic: Stock dividend

13.	Which one of the following does not affect the total equity of a firm but does increase the number of shares outstanding?    A.  special dividend B.  stock split C.  share repurchase D.  rights offer E.  liquidating dividend Refer to section 17.8

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-03 The difference between cash and stock dividends. Section: 17.8 Topic: Stock split

14.	Bell Weather Markets has recently sold for as little as $8 a share and as much as $15 a share. The difference between these two prices is referred to as the:    A.  price variance. B.  bid-ask spread. C.  trading range. D.  opening price. E.  closing price. Refer to section 17.8

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-03 The difference between cash and stock dividends. Section: 17.8 Topic: Trading range

15.

A reverse stock split is defined as:    A.  an increase in the number of shares outstanding that does not affect owners' equity. B.  a firm buying back existing shares of its stock on the open market. C.  a firm selling new shares of stock on the open market. D.  a decrease in the number of shares outstanding that does not affect owners' equity. E.  a decrease in both the number of shares outstanding and the price per share. Refer to section 17.8

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-03 The difference between cash and stock dividends. Section: 17.8 Topic: Reverse stock split

16.

Which one of the following statements related to cash dividends is correct?    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. Refer to section 17.1

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-01 Dividend types and how dividends are paid. Section: 17.1 Topic: Cash dividend

17.

Billingsley United declared a $0.20 a share dividend on Thursday, October 16. The dividend will be paid on Monday, November 10 to shareholders of record on Friday, October 31. Which one of the following is the ex-dividend date?    A.  Tuesday, October 28 B.  Wednesday, October 29 C.  Thursday, October 30 D.  Wednesday, November 5 E.  Thursday, November 6 Refer to section 17.1

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 17-01 Dividend types and how dividends are paid. Section: 17.1 Topic: Ex-dividend date

18.

Taylor's Tools declared a $0.48 per share dividend on Friday, March 7. The dividend will be paid on Monday, April 7. The ex-dividend date is Tuesday, March 18. What is the record date?    A.  Friday, March 14 B.  Monday, March 17 C.  Wednesday, March 19 D.  Thursday, March 20 E.  Friday, March 21 Refer to section 17.1

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 17-01 Dividend types and how dividends are paid. Section: 17.1 Topic: Record date

19.	The last date on which you can purchase shares of stock and still receive the dividend is the date which is _____ business days prior to the date of record.    A.  1 B.  2 C.  3 D.  4 E.  5 Refer to section 17.1

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 17-01 Dividend types and how dividends are paid. Section: 17.1 Topic: Ex-dividend date

20.

Kate purchased 500 shares of Fast Deliveries stock on Wednesday, July 7th. Ted purchased 100 shares of Fast Deliveries stock on Thursday, July 8th. Fast Deliveries declared a dividend on June 20th to shareholders of record on July 12th and payable on August 1st. Which one of the following statements concerning the dividend paid on August 1st is correct given this information?    A.  Neither Kate nor Ted is entitled to the dividend. B.  Kate is entitled to the dividend but Ted is not. C.  Ted is entitled to the dividend but Kate is not. D.  Both Ted and Kate are entitled to the dividend. E.  Both Ted and Kate are entitled to one-half of the dividend amount. Refer to section 17.1

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 17-01 Dividend types and how dividends are paid. Section: 17.1 Topic: Ex-dividend date

21.	All else equal, the market value of a stock will tend to decrease by roughly the aftertax value of the dividend on the:    A.  dividend declaration date. B.  ex-dividend date. C.  date of record. D.  date of payment. E.  day after the date of payment. Refer to section 17.1

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-01 Dividend types and how dividends are paid. Section: 17.1 Topic: Ex-dividend date

22.

Which one of the following statements related to dividend policy is correct?    A.  The primary question related to dividend policy is whether or not a firm should ever pay a dividend. B.  Both dividends and dividend policy are irrelevant. C.  Dividend policy focuses on the timing of dividend payments. D.  Homemade dividends increase the importance of a firm's dividend policy decisions. E.  Whether or not a firm ever pays a dividend is irrelevant to equity valuation. Refer to section 17.2

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-02 The issues surrounding dividend policy decisions. Section: 17.2 Topic: Dividend policy

23.

Automatic dividend reinvestment plans: I. require that stockholders reinvest all of the dividends to which they are entitled. II. sometimes grant shareholders the privilege of purchasing additional shares at a discounted price. III. help shareholders create their own homemade dividend policies. IV. help make corporate dividend policies irrelevant to individual stockholders.    A.  II only B.  III only C.  II and III only D.  II, III, and IV only E.  I, II, III, and IV Refer to section 17.2.

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 17-02 The issues surrounding dividend policy decisions. Section: 17.2 Topic: Dividend reinvestment plans

24.

Which of the following tends to increase the ability of a shareholder to create his or her own homemade dividend policy? I. low taxes on capital gains II. dividend reinvestment plans III. large holdings of shares IV. low cost equity purchases    A.  II only B.  II and III only C.  I, II, and III only D.  II, III, and IV only E.  I, II, III, and IV Refer to section 17.2

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 17-02 The issues surrounding dividend policy decisions. Section: 17.2 Topic: Homemade dividend policy

25.

Which one of the following favors a low dividend policy?    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 rates Refer to section 17.3

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 17-02 The issues surrounding dividend policy decisions. Section: 17.3 Topic: Dividend policy

26.

The fact that flotation costs can be significant is an argument for:    A.  a firm to issue larger dividends than its closest competitors. B.  a firm to maintain a constant dividend policy even if it frequently has to issue new C.  shares. D.  maintaining a constant dividend policy even when profits decline significantly. E.  maintaining a high dividend policy. F.  maintaining a low dividend policy and rarely issuing extra dividends. Refer to section 17.3

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 17-02 The issues surrounding dividend policy decisions. Section: 17.3 Topic: Flotation costs

27.

Which of the following tend to keep dividends low? I. shareholders desiring current income II. terms contained in bond indenture agreements III. the desire to maintain constant dividends over time IV. flotation costs    A.  II and III only B.  I and IV only C.  II, III, and IV only D.  I, II, and III only E.  I, II, III, and IV Refer to section 17.3

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 17-02 The issues surrounding dividend policy decisions. Section: 17.3 Topic: Dividend policy

28.

Which of the following shareholders tend to favor a high dividend policy? I. retired individuals II. endowment funds III. corporate investors IV. investors with high dividend tax rates but low capital gains tax rates    A.  I and III only B.  II and IV only C.  I, II, and III only D.  II, III, and IV only E.  I, II, III, and IV Refer to section 17.4

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 17-02 The issues surrounding dividend policy decisions. Section: 17.4 Topic: Dividend policy

29.

An investor is more likely to prefer a high dividend payout if a firm:    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. Refer to section 17.4

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 17-02 The issues surrounding dividend policy decisions. Section: 17.4 Topic: Dividend policy

30.

The information content of a dividend increase generally signals that:    A.  the firm has a one-time surplus of cash. B.  the firm has few, if any, net present value projects to pursue. C.  management believes earnings growth will be strong going forward. D.  the firm has more cash than it needs due to a decline in future orders. E.  dividends thereafter will be lower. Refer to section 17.5

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 17-02 The issues surrounding dividend policy decisions. Section: 17.5 Topic: Information content

31.

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?    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 year Refer to section 17.5

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 17-02 The issues surrounding dividend policy decisions. Section: 17.5 Topic: Dividend policy

32.

The dividend market is in equilibrium when:    A.  all firms adopt a low dividend policy. B.  half of the firms adopt a low dividend policy and half adopt a high dividend policy. C.  all clienteles are satisfied. D.  dividends remain constant and no special dividends are declared. E.  the total amount of the annual dividends is equal to the net income for the year. Refer to section 17.5

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-02 The issues surrounding dividend policy decisions. Section: 17.5 Topic: Clientele effect

33.

Which one of the following statements related to stock repurchases is correct?    A.  An open market stock repurchase increases the total wealth of a shareholder if you ignore taxes, costs, and market imperfections. B.  Targeted repurchases must be offered to all shareholders but can be done in steps such that only a portion of the shareholders have the option to sell at any one point in time. C.  When a firm wishes to repurchase shares in the open market, it will do so in a special trading session that is set up by the SEC. D.  A firm may spend more cash over the course of a year on stock repurchases than it does on cash dividends. E.  Tender offer prices must be set equal to the opening market price on the day the tender offer is announced. Refer to section 17.6

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 17-04 Why share repurchases are an alternative to dividends. Section: 17.6 Topic: Stock repurchase

34.

Which one of the following statements related to stock repurchases is correct?    A.  U.S. industrial firms have increased their stock repurchases every year for each of the past twenty years. B.  A stock repurchase can be used as a means for incumbent officers to retain control of a firm. C.  A tender offer indicates that a firm is willing and able to purchase how ever many shares the current shareholders wish to sell. D.  All stock repurchases must be identified as such to the selling party. E.  Stock repurchases can be a relatively tax-efficient method of distributing cash to shareholders. Refer to section 17.6

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 17-04 Why share repurchases are an alternative to dividends. Section: 17.6 Topic: Stock repurchase

35.

A stock repurchase program:    A.  requires all shareholders to sell a fraction of their shares. B.  is preferred over a high-dividend program only by tax-exempt shareholders. C.  decreases both the number of shares outstanding and the market price per share. D.  has no effect on a firm's financial statements. E.  is essentially the same as a cash dividend program provided there are no taxes or other costs. Refer to section 17.6

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 17-04 Why share repurchases are an alternative to dividends. Section: 17.6 Topic: Stock repurchase

36.

Which one of the following is a result of a stock repurchase?    A.  increase in the number of shares outstanding B.  increase in the market price per share C.  increase in the total equity of the repurchasing firm D.  decrease in EPS E.  PE ratio equal to that resulting from a comparable cash dividend Refer to section 17.6

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 17-04 Why share repurchases are an alternative to dividends. Section: 17.6 Topic: Stock repurchase

37.

If you ignore taxes and costs, a stock repurchase will: I. reduce the total assets of a firm. II. decrease the earnings per share. III. reduce the PE ratio more so than an equivalent stock dividend. IV. reduce the total equity of a firm.    A.  I and III only B.  I and IV only C.  II and IV only D.  I, III, and IV only E.  II, III, and IV only Refer to section 17.6

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 17-04 Why share repurchases are an alternative to dividends. Section: 17.6 Topic: Stock repurchase

38.

Steve owns 3,000 shares of NOP, Inc. stock, which he purchased six years ago at a price of $22 a share. Today, these shares are selling for $68 each. Assume the current tax laws are such that Steve is subject to a tax rate of 25 percent on both his dividend income and his capital gains. From Steve's point of view, a stock repurchase today: (Ignore costs)    A.  is equivalent to a cash dividend in all respects. B.  is more desirable than a cash dividend in respect to taxes. C.  will result in the same tax liability as an equivalent cash dividend. D.  is more highly taxed than a cash dividend. E.  is totally unacceptable to him. Refer to section 17.7

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 17-04 Why share repurchases are an alternative to dividends. Section: 17.7 Topic: Stock repurchase

39.

Which one of the following statements correctly applies to U.S. industrial firms based on the period of 1984-2004?    A.  Earnings growth rates tend to lag dividend growth rates. B.  Dividends tend to fluctuate significantly from quarter to quarter. C.  The percentage of these firms paying dividends in 2004 was higher than in 1984. D.  The total amount of dividends paid by these firms was greater in 2004 than in 1984. E.  Non-dividend paying firms in 1984 were more apt to commence paying regular dividends than to implement a stock repurchase program. Refer to section 17.7

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 17-02 The issues surrounding dividend policy decisions. Section: 17.7 Topic: Dividend policy

40.

Which one of the following statements appears to be supported by the current dividend policies of U.S. industrial firms?    A.  Firms tend to increase the dividend amount per share, even when it's unclear if the increase can be maintained. B.  Investors no longer react to changes, either up or down, in dividends. C.  Newer, high-growth firms tend to pay larger dividends than mature firms. D.  Dividends are still viewed by shareholders as a signal of a firm's future outlook. E.  Managers are no longer hesitant to lower dividend payments. Refer to section 17.7

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 17-02 The issues surrounding dividend policy decisions. Section: 17.7 Topic: Dividend policy

41.

Which one of the following statements is correct?    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. Refer to section 17.7

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 17-02 The issues surrounding dividend policy decisions. Section: 17.7 Topic: Dividend policy

42.	Which of the following balance sheet accounts are affected by a small stock dividend? I. cash II. common stock III. retained earnings IV. capital in excess of par value    A.  I and III only B.  II and III only C.  II and IV only D.  II, III, and IV only E.  I, II, III, and IV Refer to section 17.8

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-03 The difference between cash and stock dividends. Section: 17.8 Topic: Small stock dividend

43.	A small stock dividend is defined as a stock dividend of less than _____ percent.    A.  10 to 15 B.  15 to 20 C.  20 to 25 D.  25 to 30 E.  30 to 35 Refer to section 17.8

AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 17-03 The difference between cash and stock dividends. Section: 17.8 Topic: Small stock dividend

44.	Which one of the following is a result of a small stock dividend?    A.  increase in retained earnings B.  decrease in total owner's equity C.  decrease in cash D.  decrease in capital in excess of par value E.  increase in common stock Refer to section 17.8

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 17-03 The difference between cash and stock dividends. Section: 17.8 Topic: Small stock dividend

45.

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    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 only Refer to section 17.8

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 17-03 The difference between cash and stock dividends. Section: 17.8 Topic: Large stock dividend

46.

Revol-Tech is a technology firm with excellent growth prospects. The firm wishes to do something to acknowledge the loyalty of the shareholders but needs all of its available cash to fund the firm's rapid growth. The market price of the stock is currently trading at the upper end of its preferred trading range. The firm is most apt to consider which one of the following in this situation?    A.  liquidating dividend B.  stock split C.  reverse stock split D.  small stock dividend E.  special cash dividend Refer to section 17.8

AACSB: Analytic Blooms: Analyze Difficulty: 1 Easy Learning Objective: 17-03 The difference between cash and stock dividends. Section: 17.8 Topic: Stock split

47.

Which two of the following are the best justifications for a reverse stock split? I. combine a reverse stock split with a stock repurchase to enable a firm to go dark II. increase the respectability of the stock III. avoid delisting IV. reduce transaction costs for shareholders    A.  I and II only B.  I and III only C.  II and III only D.  II and IV only E.  III and IV only Refer to section 17.8

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 17-03 The difference between cash and stock dividends. Section: 17.8 Topic: Reverse stock split

48.

A stock split:    A.  increases the total value of the common stock account. B.  decreases the value of the retained earnings account. C.  increases the par value per share. D.  increases the value of the capital in excess of par account. E.  decreases the market value per share. Refer to section 17.8

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 17-03 The difference between cash and stock dividends. Section: 17.8 Topic: Stock split

49.

Stock splits can be used to:    A.  adjust the market price of a stock such that it falls within a preferred trading range. B.  decrease the excess cash held by a firm thereby lowering agency costs. C.  increase both the number of shares outstanding and the market price per share. D.  increase the total equity of a firm. E.  adjust the debt-equity ratio. Refer to section 17.8

AACSB: Analytic Blooms: Understand Difficulty: 1 Easy Learning Objective: 17-03 The difference between cash and stock dividends. Section: 17.8 Topic: Stock split

50.

Which one of the following is a direct result of a 2-for-1 stock split?    A.  a 100 percent increase in the number of shareholders B.  a 100 percent increase in the common stock account balance C.  a 100 percent decrease in the stock price D.  a 50 percent increase in the number of shares outstanding E.  a 50 percent decrease in the par value per share Refer to section 17.8

AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 17-03 The difference between cash and stock dividends. Section: 17.8 Topic: Stock split

51.

Sligo Minerals stock is currently trading at $6 a share. The firm believes its primary clientele can afford to spend between $1,500 and $2,000 to purchase a round lot of 100 shares. The firm should consider a:    A.  reverse stock split. B.  liquidating dividend. C.  stock dividend. D.  stock split. E.  special dividend. Refer to section 17.8

AACSB: Analytic Blooms: Analyze Difficulty: 2 Medium Learning Objective: 17-03 The difference between cash and stock dividends. Section: 17.8 Topic: Reverse stock split

52.

A one-for-four reverse stock split will:    A.  increase the par value by 25 percent. B.  increase the number of shares outstanding by 400 percent. C.  increase the market value but not affect the par value per share. D.  increase a $1 par value to $4. E.  increase a $1 par value to $5. Refer to section 17.8

AACSB: Analytic Blooms: Analyze Difficulty: 2 Medium Learning Objective: 17-03 The difference between cash and stock dividends. Section: 17.8 Topic: Reverse stock split

53.

A firm wants to maintain a minimum stock price of $15 a share. Due to a recent market downturn, the stock is currently selling for $6 a share. The firm should consider a:    A.  3-for-1 stock split. B.  4-for-1 stock split. C.  1-for-3 reverse stock split. D.  1-for-4 reverse stock split. E.  1-for-5 reverse stock split. Refer to section 17.8

AACSB: Analytic Blooms: Analyze Difficulty: 2 Medium Learning Objective: 17-03 The difference between cash and stock dividends. Section: 17.8 Topic: Reverse stock split

54.

Plyler Cabinets declared a dividend of $1.20 a share on May 15 to holders of record on Monday, June 1. The dividend is payable on June 15. Sara purchased 500 shares of Plyler Cabinets stock on Friday, May 29. How much dividend income will she receive on June 15 from Plyler Cabinets?    A.  $0 B.  $0.80 C.  $1.60 D.  $160.00 E.  $320.00 Sara will not receive any dividend income because she purchased the shares after the ex-dividend date.

AACSB: Analytic Blooms: Apply Difficulty: 1 Easy Learning Objective: 17-01 Dividend types and how dividends are paid. Section: 17.1 Topic: Ex-dividend date