This quiz works best with JavaScript enabled. Home > Corporate Finance > Dividend Policy – Quiz 2 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Dividend Policy Quiz 2 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. How does dividend policy affect the cost of capital for a firm? A) Dividend policy increases the cost of capital for a firm. B) Dividend policy only affects the firm's revenue, not the cost of capital. C) Dividend policy can affect the cost of capital by influencing investor perception of the firm's stability and growth potential. D) Dividend policy has no impact on the cost of capital. Show Answer Correct Answer: C) Dividend policy can affect the cost of capital by influencing investor perception of the firm's stability and growth potential. 2. Financial signaling has been raised as an argument in the battle over the relevancy of dividends. Which of the following statements concerning dividends is most likely to be voiced by someone using the financial signaling argument? A) A dividend decrease should be viewed by investors as "good news." The dividend decrease acts to add persuasion to the statement that the firm has better uses for the earnings of the company than the stockholders. B) Reported accounting earnings of a company, not dividends, are a proper reflection or signal of the company's economic earnings. C) The price of a firm's stock should react unfavorably to an increase in dividends. D) Cash dividends speak louder than words when it comes to conveying information about management's expectations of the future. Show Answer Correct Answer: D) Cash dividends speak louder than words when it comes to conveying information about management's expectations of the future. 3. Which of the following are sources of dividends? A) Current year's profit. B) Past year's profits. C) Money provided by government. D) All of the above. Show Answer Correct Answer: D) All of the above. 4. This one is not Mechanics of Cash Dividend Payments is ..... A) Payment Date. B) Declaration Date. C) Holder of Record Date. D) Stock Split. Show Answer Correct Answer: D) Stock Split. 5. The dividend-payout ratio is equal to A) The dividend yield plus the capital gains yield. B) Total dividends divided by net profit. C) Current share price divided by annual dividends per share. D) Total dividends divided by total ordinary shares issued. Show Answer Correct Answer: B) Total dividends divided by net profit. 6. Depending on the perception of uncertainty about future cash flows, the company may issue dividends A) Reduce company value. B) Increase company value. C) The company's value remains unchanged. D) Shareholder rebound. E) None of the above. Show Answer Correct Answer: B) Increase company value. 7. The clientele effect states that investors fall into various groups because of differences in theirpreferences for which one of the following? A) Share price levels. B) Risk level. C) Short term vs Long term investment. D) Dividends. E) Rate of returns. Show Answer Correct Answer: D) Dividends. 8. In addition to regular regular dividends, additional dividends are called A) Dividends and dividends. B) Special dividend. C) Additional dividends. D) All of the above. E) None of the above. Show Answer Correct Answer: B) Special dividend. 9. To apply for the initial listing of stocks, an important part of the application documents, called, must be distributed to relevant government units and investors. A) Operation plan. B) Investment plan. C) Marketing plan. D) Disclosure instructions. E) None of the above. Show Answer Correct Answer: D) Disclosure instructions. 10. 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 earning. D) Dividend. Show Answer Correct Answer: D) Dividend. 11. What would happen to the after tax cost of debt if there is an increase in the corporate tax rate: A) Will increase. B) Will decrease. C) Will remain the same. D) None of above. Show Answer Correct Answer: B) Will decrease. 12. The profits of the corporation are an important source to financing the firm, that is the decisions of the dividend policy is called ..... A) Operating Decisions. B) Investing decisions. C) Financing decisions. D) Production decisions. Show Answer Correct Answer: C) Financing decisions. 13. This theory states that investors prefer dividend than capital gain because the dividend is less risky. A) Tax preference theory. B) Dividend irrelevant theory. C) Bird in hand theory. D) Signaling effectt. Show Answer Correct Answer: C) Bird in hand theory. 14. What is capital gains in shares? A) Dividend received. B) The difference between buying and selling price. C) Interest payment. D) The principal and interest payment. Show Answer Correct Answer: B) The difference between buying and selling price. 15. Hafiz owns 1, 000 shares of Gangnam stock. Each stock is stated at RM2.50 per share. Gangnam Corporated also just announced a STOCK DIVIDEND payout of 10 percent. How many shares will Heidi own? A) 2, 500 shares. B) 900 shares. C) 1, 100 shares. D) 1, 000 shares. Show Answer Correct Answer: C) 1, 100 shares. 16. Because financial risks have the effect of intensifying operational risks, companies with smaller operational risks should set lower debt ratios to avoid further intensifying operational risks. A) True. B) Untrue. Show Answer Correct Answer: B) Untrue. 17. In the process of dividend payment. Will weekends be counted as the days of the payment A) YES. B) NO. C) MAYBE. D) DEPENDS. Show Answer Correct Answer: B) NO. 18. In Q.1 of test paper what is MP of share in (ii) A) 240. B) 220. C) 200. D) None of these. Show Answer Correct Answer: A) 240. 19. The management, in order to retain control of the company in their own hands, may prefer to paying dividends rather than retain profits, because the control of the existing shareholders will get diluted if the company issues new shares. A) Yes. B) No. Show Answer Correct Answer: B) No. 20. Dividend policy determines: A) What portion of earnings will be paid out to stock holders. B) What portion will be retained in the business to finance long-term growth. C) Only (A) not (B). D) Both (A) and (B). Show Answer Correct Answer: D) Both (A) and (B). ← PreviousNext →Related QuizzesDividend Policy Quiz 1Dividend Policy Quiz 3Dividend Policy Quiz 4Dividend Policy Quiz 5Dividend Policy Quiz 6Dividend Policy Quiz 7Dividend Policy Quiz 8Capital Structure QuizWorking Capital Management Quiz 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books