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Taylor's stock has plummeted in value and is currently priced at $5 a share.
The firm prefers the price exceed $10 a share and thus has decided to do a reverse stock split.
However, when it does this, the firm wants the stock price increased to at least twice its preferred minimum as it is
concerned the price will fall further. Which one of the following stock split ratios is most appropriate for this situation?
 
4-for-1
7-for-2
2-for-7
1-for-4
1-for-3
   
M&N stock is currently selling for $22 per share.
The firm just made an offer to one of its major shareholders to repurchase all the shares owned by that shareholder for $26 per share.
What type of offer is being made?
 
Rights offer
Private issue
Tender offer
Targeted repurchase
Secondary issue
   
Heidi owns 400 shares of Boyd Enterprises stock, which is valued at $13 a share.
Boyd Enterprises just declared a stock dividend of 4 percent.
How many shares will Heidi own and what will be the price per share after the dividend?
 
416; $13.00
416; $12.50
416; $13.50
385; $12.50
385; $13.00
 
400 x 1.04 = 416
13 / 1.04 = 12.50
   
Kelsey International declared a dividend on Friday, November 13, that is payable on Friday, December 11,
to holders of record on Monday, November 30. What is the latest date that you can purchase this stock if you
wish to receive this dividend? Assume there are no banking holidays within this period of time.
 
Thursday, November 26
Monday, November 30
Tuesday, November 24
Wednesday, November 25....
Friday, November 27
   
Two weeks ago, Jensen’s declared a dividend of $1.34 a share.
The ex-dividend date is tomorrow.
All else constant, which one of the following is the best estimate of Jensen’s opening stock price tomorrow?
 
Today's closing price plus an amount approximately equal to the aftertax value of the dividend
The same as today's closing price since the dividend is expected
$1.34 higher than today's closing price
Today's closing price minus an amount approximately equal to the after-tax value of the dividend
$1.34 lower than today's closing price
   
The argument that dividend policy is irrelevant tends to be supported by which one of these factors?
 
The current tax exclusion available to corporate investors
Current tax laws
An unsatisfied demand for high-dividend-paying stocks
Current equilibrium in the clientele dividend market
Flotation costs associated with equity issues
   
Metal Fabricators recently sold its poorest performing division and realized netproceeds from the transaction of $1.63 million.
The firm has 320,000 shares of stock outstanding and a market price of $49 a share. The firm is now preparing to distribute the
entire sale proceeds in the form of a liquidating dividend. What is the best estimate of the ex-dividend stock price?
Ignore taxes and market imperfections.
 
$44.40
$43.91
$41.38
$44.14
$43.79
 
Amount of liquidating dividend = 1630000/320000
= 5.09 per share
Ex dividend price would be = 49-5.09 = 43.91
Ans is a $43.91
   
Global Traders has common stock outstanding at a market price of $46 per share.
The total market value of the firm is $5,754,600. The firm plans on liquidating one of its divisions for $620,000 in cash,
after taxes, and distributing the proceeds to the shareholders in the form of a liquidating dividend.
What will be the amount per share of that dividend?
 
$4.782
$4.708
$5.197
$4.620
$4.956
 
5,754,600 / 46 = 125100
620,000 / 125100 = 4.956
   
Botanical Gardens Nursery has 7,500 shares of stock outstanding at a market price of $18 a share.
The earnings per share are $1.23. The firm has total assets of $384,000 and total liabilities of $146,000.
Today, the firm is paying a quarterly cash dividend of $.22 a share.
What will be the earnings per share after the dividend is paid if the tax rate on dividends is 15 percent?
 
$1.23
$1.01
$1.17
$1.20
$1.04
 
Earnings per share are not affected by dividend payments hence they would remain the same that is $1.23.
   
Which one of the following is a payment by a firm to its shareholders
from any source other than current or accumulated retained earnings?
 
A. Interest
B. Distribution
C. Retained earnings
D. Dividend
E. Stock repurchase
   
Which one of the following best defines a regular cash dividend?
 
A. Distribution by a firm to its shareholders
B. Payment from any source by a firm to its owners
C. One-time payment of cash by a firm to its shareholders
D. Cash payment by a firm to its owners as part of a firm's normal operations
E. Distribution of the proceeds from the sale of a portion of a firm's operations
   
The date on which the board of directors agrees to pay a dividend and passes a resolution to do so?
 
Declaration date
   
The determination is made as to which shareholders receive a dividend payment
 
date of record
   
When dividend checks are mailed
 
payment date
   
The clientele effect states that investors fall into various groups because of differences in their preferences for which one of the following?
 
dividends
   
Non-cash payment made by a firm to shareholders that lessens the value of each outstanding share?
 
Stock dividend
   
Increases the number of shares outstanding but does not increase the value of owners equity?
 
stock split
   
Reduces the number of shares outstanding but does not change a firm’s total equity?
 
reverse split
   
Kelsey International declared a dividend on Friday, November 13, that is payable on Friday, December 4,
to holders of record on Monday, November 30.
What is the latest date that you can purchase this stock if you wish to receive this dividend?
Assume there are no banking holidays within this period of time.
 
Wednesday Nov, 25.
 
Two business days before.
   
Twelve days ago, DOG, Inc. declared a dividend of $1.34 a share. The ex-dividend date is tomorrow.
All else constant, which one of the following is the best estimate of DOG, Inc.'s opening stock price tomorrow?
Today's closing price MINUS an amount approximately equal to the
 
after-tax value of the dividend
   
The time pattern of dividend payout
 
Dividend Policy
   
Which one of the following would tend to favor a low-dividend payout?
 
A. Higher tax rates on capital gains than on dividend income
B. High flotation cost for equity issues
C. Endowment fund investors who cannot spend principal
D. Investors' desire for a high-dividend yield
E. Elimination of the tax deferral on capital gains
   
Which two of the following tend to limit the amount of dividends that can be paid by a leveraged corporation?
 
I. Current tax laws
II. Corporate tax exclusion
III. Bond indenture covenant
IV. State laws pertaining to retained earnings
III and IV
   
Which one of the following factors favors a high-dividend payout?
 
A. Low transaction costs on stock trades
B. Lower taxes on capital gains than on dividends
C. Tax deferment on capital gains, but not on dividend income
D. Flotation costs
E. Corporate shareholders
 
zero% of capital gains are excluded from taxation for corporate shareholders.
   
Phil is reviewing ABC Company's dividend policy as it relates to the firm's shareholders.
As part of this review, he wants to divide shareholders into two basic categories in respect to dividend payments.
The first group will be shareholders who are taxed on dividend income and the second group will be shareholders who receive
some form of tax break on dividend income.
Which of the following types of shareholders should be placed in the tax-favored second group?
 
I. Corporate
II. Pension fund
III. Individuals
IV. Trust funds
   
An offer to purchase the stock of a firm targeted for acquisition at a price just high enough to tempt
stockholders to sell their shares
 
tender offer
   
Through which of the following can a firm can reduce its number of outstanding shares?
 
I. Open market purchase
II. Rights offer
III. Tender offer
IV. Targeted repurchase
   
Kelso's is considering spending $80,000 on either a stock repurchase or an extra cash dividend.
Which one of the following values will be the same whether the firm pays a dividend or repurchases stock?
Assume there are no taxes or market imperfections.
 
PE ratio
   
What will decrease in the event of a stock repurchase, or the firm pays a cash dividend?
 
PE Ratio
   
Cash dividends send which two of the following signals to the market?
 
I. Agency costs will be lowered since less cash will be held by the firm.
II. The firm is planning on downsizing.
III. The firm is currently, and expects to continue to be, profitable.
IV. The firm will no longer conduct stock repurchases.
   
Which one of the following is basically equivalent to a 2-for-1 stock split?
 
100% stock dividend
   
Mercury Homes just declared a 4-for-3 stock split. Which of the following occurred as a result of this split?
 
The number of shares outstanding increased by 1/3
 
price per share decreased by 1/4
price is first part shares is second part.
   
Lester's has a market value balance sheet as shown below.
The firm currently has 7,500 shares of stock outstanding at a price per share of $40. Net income is $9,500.
The firm has decided to repurchase $20,000 worth of its outstanding stock.
What will the firm's PE ratio be after this repurchase, all else held constant?
 
29.47
 
Number of outstanding shares = 7,500 - ($20,000/$40) = 7,000 shares;
Earnings per share = $9,500/7,000 = $1.35714; PE ratio = $40/$1.357143 = 29.47.
   
LOG, Inc. currently has 300,000 shares of stock outstanding that sell for $73 per share.
Assuming no market imperfections or tax effects exist, what will the share price be after LOG has a 5-for-3 stock split?
 
$43.80
 
$73 * 3 / 5 = $43.80.
   
Cookies and Cream has 9,000 shares of stock outstanding at a market price of $14.65 per share.
What will the price per share be after the firm declares a 12 percent stock dividend?
Ignore taxes and market imperfections.
 
$13.08
 
Stock price = $14.65/1.12 = $13.08.
   
Which of the following is a payment of either cash or shares of stock that is paid out of earnings to a firm's shareholders?
 
Dividend
   
As compared to a cash dividend, a share repurchase will do which of the following?

A. Increase both earnings per share and the PE ratio
B. Increase the earnings per share but not affect the PE ratio
C. Increase the earnings per share and decrease the PE ratio
D. Not affect either the earnings per share nor the PE ratio
E. Not affect the earnings per share but will decrease the PE ratio
C. Increase the earnings per share and decrease the PE ratio
   
Which one of the following statements is correct?

A. Generally speaking, the size of a firm has no effect on its tendency to pay dividends.
B The market crash and the accounting scandals in the early 2000's tended to cause financially- stable. firms to cease paying cash dividends.
C The majority of firms either started paying or increased their dividends per share in response to the May 2003 change in dividend taxation.
D. Firms tend to prefer cash dividends over share repurchases for their flexibility and tax benefits.
E. A non-dividend paying firm is more apt to do a stock repurchase than to commence paying dividends.
   
Which of the following are factors that help explain why the percentage of U.S. industrial firms paying dividends has increased since the early 2000s?

I. decrease in the number of non-dividend paying firms
II. maturing of young, successful firms III. signaling of a firm's financial health IV. May 2003 tax act
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
   
Which one of the following statements is correct concerning dividends in the U.S.?

A. The total amount of dividends paid by the S&P 500 companies has increased steadily every year since 1985.
B. Only financial sector firms decreased dividends in 2008.
C. Dividend amounts tend to react quickly to changes in the economy.
D. Firms tend to quickly adjust their dividends to changes in the firm's earnings per share.
E. There are less than 75 companies in the U.S. that have consistently increased their dividends for at least the past 25 years.
   
Research conducted on firms' dividend policies over time support which one of the following conclusions?


A. Aggregate dividends and stock repurchases have steadily declined in real terms.
B. Dividends are currently paid by the vast majority of firms.
C. Managers tend to smooth dividends.
D. Stock prices tend to increase whenever anticipated changes in dividends occur.
E. Firms commence paying dividends prior to doing any stock repurchases.
   
Cash dividends send which two of the following signals to the market?


I. agency costs will be lowered since less cash will be held by the firm
II. the firm is planning on downsizing
III. the firm is currently, and expects to continue to be, profitable
IV. the firm will no longer conduct stock repurchases
A. I and II only
B. II and III only
C. III and IV only
D. II and IV only
E. I and III only
   
Which one of these statements is correct?
A. Since the early 1980's, it has become increasingly more difficult to do a stock repurchase due to SEC regulations.
B. It is relatively easy to determine whether or not a firm has completed a planned stock repurchase.
C. Fixed stock repurchases allow managers to repurchase shares only when they feel those shares are undervalued.
D. A fixed stock repurchase plan could be a negative net present value investment for the stock issuer.
E. Stock repurchases send the exact same signals to investors as do cash dividends
   
Which one of the following is a drawback of cash dividends?


A. Firms may have to forego positive net present value projects.
B. Stock prices tend to increase as annual dividend amounts increase.
C. Cash dividends support stock prices.
D. Dividends are felt to be directly related to agency costs.
E. Dividend-paying firms tend to attract a wider field of investors than do non-dividend-paying firms.
   
Which one of the following tends to be the primary attitude of firms' towards their dividend policy?


A. Dividends should be increased annually no matter what.
B. Dividends should be flexible and adjusted annually in response to changes in the firm's earnings.
C. The costs associated with cutting dividends are perceived to be less than the costs of obtaining external financing.
D. Once a dividend is increased, it should not be decreased.
E. Dividend smoothing is talked about but is not really a factor that affects dividend decisions.
   
Lexington Stables just declared a 15 percent stock dividend. Which one of the following increased by 15 percent as a result of this dividend?
A. Book value of firm's equity
B. Shareholders' wealth
C. Number of shares outstanding
D. Firm's cash balance
E. Stock price
C. Number of shares outstanding
   
Which one of the following is a payment by a firm to its shareholders
from any source other than current or accumulated retained earnings?
 
Distribution
   
Which one of the following best defines a regular cash dividend?
 
Cash payment by a firm to its owners as part of a firm's normal operations
   
Which one of the following is the date on which the board of directors
agrees to pay a dividend and passes a resolution to do so?
 
Declaration date
   
The ex-dividend date is defined as _______ ________ day(s) before the date of record.
 
two, business
   
On which one of the following dates is the determination made as to
which shareholders will receive a dividend payment?
 
Date of record
   
On which one of the following dates are dividend checks mailed?
 
Payment date
 
Which one of the following is basically equivalent to a 2-for-1 stock split?
A. 20 percent stock dividend
B. 25 percent stock dividend
C. 50 percent stock dividend
D. 100 percent stock dividend
E. 200 percent stock dividend
   
Mercury Homes just declared a 4-for 3 stock split. Which of the following occurred as a result of this split?
I. number of shares outstanding increased by 1/3
II. number of shares outstanding decreased by 1/4
III. price per share increased by 1/3
IV. price per share decreased by 1/4
A. I only
B. I and III only
C. I and IV only
D. II and III only
E. II and IV only
   
Of the following, which two are the best reasons for doing a reverse stock split?
I. return a stock to its normal trading range
II. eliminate small shareholders
III. reduce shareholder costs
IV. avoid delisting
A. I and II
B. I and III
C. II and III
D. II and IV
E. III and IV
   
The clientele effect states that investors fall into various groups
because of differences in their preferences for which one of the following?
 
Dividends
   
This morning, Structural Steel purchased 3,500 of its outstanding shares in the open market.
What type of transaction was this?
 
Stock repurchase
   
Which of these is a noncash payment made by a firm to its shareholders that lessens the value of each outstanding share?
 
Stock dividend
   
Which one of the following reduces the number of shares outstanding but does not decrease the value of owners' equity?
 
Reverse stock split
   
During the past year, ABC stock has sold for as little as $19 a share and as much as $33 a share.
Which one of the following terms applies to these prices?
 
Trading range
   
Which one of the following increases the number of shares outstanding but does not change a firm's equity account values?
 
stock split
   
Miller' s Hardware recently paid $1.21 per share in dividends.
The company currently has excess cash and would like to distribute an additional $.35 a share to its shareholders.
However, the company is concerned about increasing the dividend by that amount as it will not be
able to afford a similar increase in the future and doesn't want to lower the dividend once it has been raised.
Which one of the following is probably the best suggestion for distributing the $.35 per share?
 
pay a special dividend of $.35 per share
   
KL Electronics has paid a quarterly dividend of $.42 per share for the past two years.
This quarter, the firm plans to pay $.42 plus an additional $.05 per share.
The firm has stated that it is uncertain whether it will pay $.42 or $.47 per share next quarter.
Which one of the following is the best description of the additional $.05 that is being paid this quarter?
 
extra dividend
   
Which one of the following is an example of a liquidating dividend?
 
Valley Feed Mills recently sold its grain storage facility and is distributing the proceeds of that sale to its shareholders
   
Which one of the following events must occur before a firm can offer a liquidating dividend?
 
asset sale
   
Kelsey International declared a dividend on Friday, November 13, that is payable on Friday,
December 11, to holders of record on Monday, November 30.
What is the latest date that you can purchase this stock if you wish to receive this dividend?
Assume there are no banking holidays within this period of time.
 
Wednesday, November 25
   
Which one of the following dates is the date on which the board of directors votes to pay a dividend?
 
Declaration date
   
Tuesday, December 1, is the ex-dividend date for Alpha stock.
Which one of the following dates is the record date?
Assume there are no banking holidays to consider.
 
Thursday, December 3
   
Davis Engineering declared a dividend to shareholders of record on Monday, February 8, that is payable on Friday,
February 26. Carla knows that her dividend check normally arrives three business days after the check is written.
On which one of the following days should she expect to receive her dividend check? Assume a 365-day year.
 
Wednesday, March 3
   
Davidson Interiors declared a dividend to holders of record on Thursday, October 15,
that is payable on Monday, November 2. Suenette purchased 200 shares of Davidson Interiors stock on Monday,
October 12, and Jake purchased 100 shares of this stock on the following day.
Which one of the following statements is correct given this information?
 
Suenette will receive the dividend but Jake will not
   
Two weeks ago, Jensen' s declared a dividend of $1.34 a share. The ex-dividend date is tomorrow.
All else constant, which one of the following is the best estimate of Jensen' s opening stock price tomorrow?
 
Today's closing price minus an amount approximately equal to the aftertax value of the dividend
   
Which one of the following statements is correct?
 
Dividend policy is the time pattern of dividend payout.
   
The argument that dividend policy is irrelevant tends to be supported by which one of these factors?
 
Current equilibrium in the clientele dividend market
   
Which one of the following statements is correct concerning the taxation of dividends and capital gains?
 
As of 2015, individual investors pay a tax rate that varies from 0 to 15 percent on dividend income
   
Which one of the following is least apt to limit the amount of cash dividends a firm can pay?
 
Increasing stock price
   
Which one of these favors a high-dividend payout?
 
Corporate shareholders
   
What percentage of capital gains are excluded from taxation for corporate shareholders?
 
0 percent
   
All of the following investors generally receive a tax break on dividend
 
income with the exception of: individuals
   
Assume that satisfied clienteles exist. Given this assumption, which one of these statements is correct?
 
Dividend policy is irrelevant as long as each clientele group remains satisfied.
   
M&N stock is currently selling for $22 per share. The firm just made an offer to one of its major shareholders to repurchase all the
shares owned by that shareholder for $26 per share. What type of offer is being made?
 
targeted repurchase
   
JTL has 148,000 shares of stock outstanding.
The firm has extra cash so it announced this morning that it is willing to repurchase 18,000 of its shares.
What type of offer is the firm making?
 
Tender offer
   
All of the following are means of reducing the number of outstanding shares with the exception of a(n):
 
rights offer
   
Kelso's is considering spending $80,000 on either a stock repurchase or an extra cash dividend.
Which one of the following values will be the same whether the firm pays a dividend or repurchases stock?
Assume there are no taxes or market imperfections.
 
Price-earnings (PE) ratio
   
A stock repurchase will:
 
decrease the PE ratio
   
Assume an all-equity firm has positive net earnings. The operating cash flow of this firm:
 
price-earnings ratio will decrease
   
Assume there are no taxes or imperfections. Given this assumption, which one of the following statements is correct?
 
A stock repurchase has the same effect on a firm's market value balance sheet as does a cash dividend
   
A share repurchase will:
 
increase the earnings per share and decrease the PE ratio.
   
Which statement is correct?
 
A non-dividend-paying firm is more apt to do a stock repurchase than to commence paying dividends
   
Which statement is correct?
 
Dividend growth tends to lag earnings growth
   
Which statement is correct regarding US companies?
 
Procter & Gamble is one example of a firm with a long history of increasing dividends.
   
Research conducted on firms' dividend policies over time support which one of the following conclusions?
 
Managers tend to smooth dividends
   
Normal cash dividends that are increased regularly tend to send which message?
 
The firm expects to be profitable.
   
Which statement is correct? Stock dividends may come at the expense of forgoing positive net present
 
value projects.
   
Which one of the following is a drawback of cash dividends? Firms may have to obtain additional external financing
which would not
 
be required in the absence of the dividends.
   
Most company managers overwhelming feel that:
 
once a dividend is increased, it should not be decreased.
   
Lexington Stables just declared a 15 percent stock dividend.
Which one of the following increased by 15 percent as a result of this dividend?
 
Number of shares outstanding
   
Which one of the following is basically equivalent to a 2-for-1 stock split?
 
100 percent stock dividend
   
Modern Homes just declared a 4-for-3 stock split. Which of the following occurred as a result of this split?
 
I. Number of shares outstanding increased by one-third
II. Number of shares outstanding decreased by one-fourth
III. Price per share increased by one-third
IV. Price per share decreased by one-fourth
I and IV only
   
Of the following, which two are the best reasons for doing a reverse stock split?
 
I. Return a stock to its normal trading range
II. Eliminate small shareholders
III. Reduce shareholder costs
IV. Avoid delisting
II and IV
   
In the US, stock dividends:
 
are concentrated in a few mature firms.
   
Twelve days ago, DOG, Inc. declared a dividend of $1.34 a share. The ex-dividend date is tomorrow.
All else constant, which one of the following is the best estimate of DOG, Inc.'s opening stock price tomorrow?


A. $1.34 lower than today's closing price
B. today's closing price minus an amount approximately equal to the aftertax value of the dividend
C. the same as today's closing price since the dividend is expected
D. $1.34 higher than today's closing price
E. today's closing price plus an amount approximately equal to the aftertax value of the dividend
   
Which one of the following statements is correct?


A. Dividends are irrelevant.
B. Flotation costs are a good reason to support a high dividend payout.
C. Current tax laws favor high current dividends for individual investors.
D. Dividend policy is the time pattern of dividend payout.
E. Corporate investors tend to prefer low dividend payouts on securities they own.
   
Which one of the following is an argument that dividend policy is irrelevant?


A. Flotation costs as they apply to equities.
B. Tax laws as they currently exist.
C. An unsatisfied demand for high-dividend paying stocks.
D. Current equilibrium in the clientele dividend market.
E. The current tax exclusion available to corporate investors.
   
Which one of the following statements is correct concerning the taxation of dividends and capital gains?


A. Seventy percent of capital gains derived from stock investments are tax exempt for corporate investors.
B. Dividends are a form of tax-exempt income for individual investors.
C. All investors are subject to the same tax rate on dividend income.
D. Individual investors can defer taxation on both dividends and capital gains.
E. As of 2003, individual investors pay a 15 percent tax on both dividends and capital gains.
   
Which one of the following would tend to favor a low dividend payout?


A. Higher tax rates on capital gains than on dividend income
B. High flotation cost for equity issues
C. Endowment fund investors who cannot spend principal
D. Investors' desire for a high dividend yield
E. Elimination of the tax-deferral on capital gains
   
Which one of the following is a payment of either cash or shares of stock that is paid out of earnings to a firm's shareholders?


A. Interest
B. Distribution
C. Retained earnings
D. Dividend
E. Stock repurchase
   
Which one of the following is a payment by a firm to its shareholders from any source other
than current or accumulated retained earnings?


A. Interest
B. Distribution
C. Retained earnings
D. Dividend
E. Stock repurchase
   
Which one of the following best defines a regular cash dividend?
A. Distribution by a firm to its shareholders
B. Payment from any source by a firm to its owners
C. One-time payment of cash by a firm to its shareholders
D. Cash payment by a firm to its owners as part of a firm's normal operations
E. Distribution of the proceeds from the sale of a portion of a firm's operations
   
Which one of the following is the date on which the board of directors agrees to pay
a dividend and passes a resolution to do so?


A. Date of record
B. Ex-dividend date
C. Payment date
D. Declaration date
E. Public announcement date
   
Which two of the following tend to limit the amount of dividends that can be paid by a leveraged corporation?


I. current tax laws
II. corporate tax exclusion
III. bond indenture covenant
IV. state laws pertaining to retained earnings


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
   
As of 2003, the maximum tax rate on long-term capital gains for high-income individuals was
which one of the following rates?


A. 10 percent
B. 15 percent
C. 20 percent
D. 35 percent
E. 39 percent
   
Which one of the following factors favors a high dividend payout?


A. Low transaction costs on stock trades
B. Lower taxes on capital gains than on dividends
C. Tax deferment on capital gains, but not on dividend income
D. Flotation costs
E. Corporate shareholders
   
What percent of capital gains are excluded from taxation for corporate shareholders?


A. 0 percent
B. 10 percent
C. 25 percent
D. 70 percent
E. 75 percent
   
Phil is reviewing ABC Company's dividend policy as it relates to the firm's shareholders.
As part of this review, he wants to divide shareholders into two basic categories in respect
to dividend payments. The first group will be shareholders who are taxed on dividend
income and the second group will be shareholders who receive some form of tax break
on dividend income. Which of the following types of shareholders should be placed in the tax-favored second group?


I. corporate
II. pension fund
III. individuals
IV. trust funds


A. I only
B. III only
C. I and III only
D. II and IV only
E. I, II, and IV only
   
The ex-dividend date is defined as day(s) before the date of record.


A. three business
B. three
C. two business
D. two
E. one
   
Assume that clienteles exist. Given this assumption, which one of the following statements is correct?


A. A firm can increase its share price by increasing its dividend payout.
B. Dividend policy is irrelevant as long as each clientele group is currently satisfied.
C. All firms will adopt a high dividend payout policy.
D. All dividends become irrelevant.
E. All firms should adopt a low dividend payout policy.
   
Martin & Martin, Inc. stock is currently selling for $19 per share.
The firm just made an offer to one of its major shareholders to repurchase all the shares
owned by that shareholder for $25 per share. What type of offer is being made?


A. Rights offer
B. Secondary issue
C. Targeted repurchase
D. Tender offer
E. Private issue
   
Joseph Turner and Sons has 125,000 shares of stock outstanding. The firm has extra cash so
 it announced this morning that it is willing to repurchase 25,000 of its shares.
What type of offer is the firm making?

A. Rights offer
B. Secondary issue
C. Targeted repurchase
D. Tender offer
E. Private issue
   
Which of the following are means by which a firm can reduce its number of outstanding shares?


I. open market purchase
II. rights offer
III. tender offer
IV. targeted repurchase


A. IV only
B. I and IV only
C. II, III, and IV only
D. I, III and IV only
E. I, II, III, and IV
   
Kelso's is considering spending $80,000 on either a stock repurchase or an extra cash dividend.
Which one of the following values will be the same whether the firm pays a dividend or repurchases stock?
Assume there are no taxes or market imperfections.


A. Number of shares outstanding
B. Price per share
C. Earnings per share
D. Price-earnings ratio
E. Market value of equity per share
   
Which one of the following will result from a stock repurchase?


A. Increase in the number of shares outstanding
B. Decrease in the earnings per share
C. Decrease in the market price per share
D. Increase in the market value of equity per share
E. Decrease in the P/E ratio
   
Elkins Feed Lot is an all-equity firm with positive net income.
Which one of the following will result if the firm pays a cash dividend?


A. Number of shares outstanding will increase
B. Earnings per share will decrease
C. Total assets will remain constant
D. Price-earnings ratio will decrease
E. Total equity will increase
   
Assume there are no taxes or imperfections. Given this assumption, which one of the following statements is correct?


A. A cash dividend has no effect on the market price of the payer's stock.
B. A cash dividend decreases shareholder wealth.
C. Stock repurchases decrease the market value per share.
D. Both a cash dividend and a share repurchase increase a firm's PE ratio.
E. A stock repurchase has the same effect on a firm's market value balance sheet as does a cash dividend
   
Given the current tax laws, which one of the following statements is correct?


A. Both stock repurchases and cash dividends are treated equally for tax purposes for individual shareholders.
B. Stock repurchases give individual shareholders more control over their personal taxes than do cash dividends.
C. Cash dividends are preferable to stock repurchases from the individual shareholder point of view.
D. Stock repurchases offer more tax benefits to the issuer than do cash dividends.
E. Cash dividends offer more tax benefits than do stock repurchases for the issuer.
   
Which one of the following statements related to stock buybacks is correct?


A. Stock buybacks are a means of obtaining shares for employee stock option grants.
B. Stock buybacks are becoming rare and may soon disappear totally.
C. In 2007 and 2008, U.S. companies issued more shares than they repurchased.
D. Firms are only permitted one large share repurchase program.
E. Share repurchases are limited to 10 percent of the firm's outstanding shares.
   
On which one of the following dates is the determination made as to which shareholders will receive a
dividend payment?


A. Date of record
B. Ex-dividend date
C. Payment date
D. Declaration date
E. Public announcement date
   
On which one of the following dates are dividend checks mailed?


A. Date of record
B. Ex-dividend date
C. Payment date
D. Declaration date
E. Public announcement date
   
The clientele effect states that investors fall into various groups because of differences in their preferences
for which one of the following?


A. Share price levels
B. Risk level
C. Short-term versus long-term investments
D. Rates of return
E. Dividends
   
This morning, Lambert Materials bought 10,000 of its outstanding shares in the open market.
What type of transaction was this?


A. Stock payout
B. Stock distribution
C. Stock dividend
D. Stock repurchase
E. Stock reversal
   
Which one of the following is a non-cash payment made by a firm to its shareholders and is a
payment that lessens the value of each outstanding share?


A. Reverse stock split
B. Cash distribution
C. Stock dividend
D. Regular dividend
E. Liquidating dividend
   
Which one of the following increases the number of shares outstanding but does not increase the value of owner's equity?


A. Stock repurchase
B. Reverse stock split
C. Stock split
D. Cash distribution
E. Liquidating dividend
   
During the past year, ABC stock has sold for as little as $19 a share and a much as $33 a share.
Which one of the following terms applies to these prices?


A. Benchmark values
B. Price splits
C. Price dividers
D. Split range
E. Trading range
   
Which one of the following reduces the number of shares outstanding but does not change a firm's total equity?
A. Stock split
B. Distribution
C. Reverse split
D. Liquidation
E. Redemption
   
Lester's Dry Goods paid $1.10 per share in dividends last year. The company currently has excess
cash and would like to distribute $0.40 a share to its shareholders. However, the company is
concerned about increasing the dividend by that amount as it will not be able to afford any
increase in the future and doesn't want to lower the dividend once it has been raised.
Which one of the following is probably the best suggestion for distributing the $0.40 per share?


A. Special dividend of $0.40 per share
B. Extra cash dividend of $0.40 per share
C. Liquidating dividend of $0.40 per share
D. Increase the regular dividend by $0.11 and pay a special dividend of $0.29
E. Increase the regular dividend by $0.11 and pay an extra cash dividend of $0.29
   
Downtown Merchants has paid a quarterly dividend of $0.60 per share for the past two years.
This quarter, the firm plans to pay $0.60 plus an additional $0.05. The firm has stated that it uncertain
whether it will pay $0.60 or $0.65 per share next quarter. Which one of the following is the best description
of the additional $0.05 that is being paid this quarter?


A. Liquidating dividend
B. Special dividend
C. Extra dividend
D. Stock dividend
E. Normal dividend
   
Which one of the following is an example of a liquidating dividend?


A. Valley Feed Mills recently sold its grain storage facility and is distributing the proceeds of that sale to its shareholders.
B, Kate's Winery has excess cash that it wishes to distribute to its shareholders in addition to its normal. cash dividend.
This extra distribution usually occurs about once every year.
C. Kurt's Music is planning to increase its quarterly dividend by three percent.
D. The Dried Florist is preparing to pay its first annual dividend of $0.08 per share.
E. Hi Tek had an extraordinarily profitable year and has decided to do a one-time only $10 per share cash dividend.
   
Which one of the following events must occur before a firm can offer a liquidating dividend?
A. Bankruptcy filing
B. Insolvency declaration
C. Asset sale
D. Negative equity
E. Failed bond issue
   
Kelsey International declared a dividend on Friday, November 13, that is payable on Friday, December 4, to
holders of record on Monday, November 30. What is the latest date that you can purchase this stock if you
wish to receive this dividend? Assume there are no banking holidays within this period of time.


A. Tuesday, November 24
B. Wednesday, November 25
C. Thursday, November 26
D. Friday, November 27
E. Monday, November 30
   
Which one of the following dates is the date on which the board of directors votes to pay a dividend?


A. Record date
B. Declaration date
C. Ex-dividend date
D. Payment date
E. Settlement date
   
Tuesday, December 1, is the ex-dividend date for Alpha stock. Which one of the following dates is the record
 date? Assume there are no banking holidays to consider.


A. Friday, November 27
B. Monday, November 30
C. Wednesday, December 2
D. Thursday, December 3
E. Friday, December 4
   
Chelsie Enterprises declared a dividend to shareholders of record on Monday, February 8, that is payable on
Friday, February 26. Carla knows that her dividend check normally arrives three business days after the check
is written. On which one of the following days should she expect to receive her dividend check?


A. Wednesday, February 10
B. Thursday, February 11
C. Monday, March 1
D. Tuesday, March 2
E. Wednesday, March 3
   
Davidson Interiors declared a dividend to holders of record on Thursday, October 15, that is payable on Monday, November 2.
Suenette purchased 200 shares of Davidson Interiors stock on Monday,
October 12 and Jake purchased 100 shares of this stock on the following day.
Which one of the following statements is correct given this information?


A. Both Suenette and Jake will receive this dividend.
B. Suenette will receive the dividend but Jake will not.
C. Jake will receive the dividend but Suenette will not.
D. Neither Suenette nor Jake will receive this dividend.
E. You cannot determine who will or will not receive this dividend based on the information provided

 

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