Dividend policy MCQ’s
1. A payment of either cash or stock out of a corporation's earnings to a firm's owners is
called a(n):
a. normal distribution.
b. retained distribution.
c. operating distribution.
D. dividend.
e. repurchase.
2. A payment by a firm to its owners from any source other than current or accumulated
retained earnings is referred to as a:
a. capital liquidation.
B. distribution.
c. special dividend.
d. repurchase.
e. stock dividend.
3. If a firm maintains its preferred debt-equity ratio and pays dividends only after meeting
its investment needs, the firm is following a dividend policy which is referred to as a
_____ dividend policy.
a. stable
B. residual
c. constant
d. remainder
e. leftover
4. What is the name given to a transaction wherein a firm buys some of its own
outstanding shares of stock?
a. stock payout
b. reverse distribution
c. stock dividend
D. repurchase
e. acquisition
5. Which one of the following is a non-cash payment made by a firm to its shareholders
that dilutes the value of each share of stock outstanding?
a. reverse stock split
b. cash distribution
C. stock dividend
d. regular dividend
e. liquidating dividend
6. Which one of the following increases the number of shares outstanding without
increasing the value of the owners' equity?
a. stock repurchase
b. reverse stock split
C. stock split
d. cash distribution
e. liquidating dividend
7. Global Metals, Inc. pays a quarterly dividend that is based on a constant percentage of
annual earnings. The dividends for each year are equal in amount. What type of dividend
policy does this firm have?
a. residual
b. special
c. cyclical
D. stable
e. extra
8. Morgantown Merchants is an all-equity firm with positive net income. Which one of
the following will result if the firm pays a cash dividend?
a. the number of shares outstanding will increase
b. the earnings per share will decrease
c. total assets will remain constant
D. the price-earnings ratio will decrease
e. total equity will increase
9. New England Fashions has 18,000 shares of stock outstanding at a market price of $29
a share. The earnings per share are $2.30. The firm has total assets of $280,000 and total
liabilities of $136,000. Today, the firm is paying an annual cash dividend of $1.40 a
share. Ignore taxes. After the dividend, the firm's:
a. price-earnings ratio will be 12.61.
b. earnings per share will be $.90.
c. stock price will be $29.
D. book value per share will be $6.60.
e. shareholder value per share will be $27.60.
10. The equity of Manor Builders currently has a total book value of $1.3 million and a
total market value of $3.8 million. The common stock has a market value of $36 a share.
The firm has no preferred stock outstanding. How much will the dividend per share be if
the firm pays out a total of $60,000 in cash dividends?
A. $.57
b. $.62
c. $.83
d. $.87
e. $.91