This quiz works best with JavaScript enabled. Home > Corporate Finance > Dividend Policy – Quiz 4 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Dividend Policy Quiz 4 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. The optimal capital structure means the ratio of capital sources at which the company's value reaches the maximum, which is the target capital structure that managers should strive to achieve for the benefit of shareholders. A) Correct. B) Incorrect. Show Answer Correct Answer: A) Correct. 2. The dividend payout ratio is equal to A) The dividend yield plus the capital gains yield. B) Dividends per share divided by earnings per share. C) Dividends per share divided by par value per share. D) Dividends per share divided by current price per share. Show Answer Correct Answer: B) Dividends per share divided by earnings per share. 3. Retained earnings are A) An indication of a company's liquidity. B) The cumulative earnings of the company after dividends. C) The same as cash in the bank. D) Not important when determining dividends. Show Answer Correct Answer: B) The cumulative earnings of the company after dividends. 4. Which of these sources of financing have the highest priority in case of financial trouble: A) Bonds. B) Preferred stocks. C) Common stocks. D) None of above. Show Answer Correct Answer: A) Bonds. 5. Which one of the following increases the number of shares outstanding but does not increase the value of owner's equity? A) Stock split. B) Reserve stock split. C) Stock repurchase. D) Cash distribution. Show Answer Correct Answer: A) Stock split. 6. Providing financing to high-risk new private companies is A) Venture capital funds. B) Junk bonds. C) Bridge loan. D) Initial public offering. E) Financial futures. Show Answer Correct Answer: A) Venture capital funds. 7. On May 7, Melbourne Mining declared a $ .50-per-share quarterly dividend payable June 28 to stockholders of record on Friday, June 7. What is the latest date by which you could purchase the stock and still get the recently declared dividend? A) June 3. B) June 4. C) June 5. D) June 6. Show Answer Correct Answer: B) June 4. 8. The relevance theory of dividend was supported by: A) Miller and Modigliani. B) Myron Gordon. C) None of above. D) Both of above. Show Answer Correct Answer: B) Myron Gordon. 9. An established company is generally liquid and not able to pay large amount of dividend. A) Yes. B) No. Show Answer Correct Answer: B) No. 10. A portion of the company's profits that is distributed is called A) Capital Gain. B) Dividends. C) Investment. D) Shares. Show Answer Correct Answer: B) Dividends. 11. Dividends are payable A) Monthly. B) Semi-quarterly. C) Yearly. D) Quarterly. Show Answer Correct Answer: C) Yearly. 12. Dividend policy is determined by the: A) Shareholders in Annual General Meeting (AGM). B) CEO of the company. C) Board of directors. D) Ministry of Corporate Affairs. Show Answer Correct Answer: C) Board of directors. 13. In a process of insolvency, creditors may ask the company to restrict the payment of cash dividends until a certain level of profits are earned, or to limit the amount of dividend, to a certain percentage of earnings. A) Yes. B) No. Show Answer Correct Answer: A) Yes. 14. Which of the theories say that dividend is relevant in determining MP of Share A) M M Approach. B) Walter Model. C) Gordon Model. D) Both (b) and (c). Show Answer Correct Answer: D) Both (b) and (c). 15. Discuss the relationship between dividend policy and stock price. A) Dividend policy has no impact on the company's stock price. B) Dividend policy only affects the company's expenses. C) Dividend policy can influence the company's stock price by signaling financial stability, attracting investors, and impacting investor perception of the company's value and potential for growth. D) Dividend policy leads to a decrease in the company's stock price. Show Answer Correct Answer: C) Dividend policy can influence the company's stock price by signaling financial stability, attracting investors, and impacting investor perception of the company's value and potential for growth. 16. Because of the ..... stock dividends reduce the firm's ability to pay dividends in the future. A) Residual theory of dividends. B) Ex-dividend date. C) Capital impairment rule. D) Dividend reinvestment plans. Show Answer Correct Answer: C) Capital impairment rule. 17. In Q.2 what is Market price of Equity share when dividend payout is 100 % A) Rs. 50. B) Rs. 37.5. C) Rs. 150. D) None of these. Show Answer Correct Answer: B) Rs. 37.5. 18. Explain the concept of constant dividend payout ratio policy with an example. A) The constant dividend payout ratio policy is when a company pays out a fixed percentage of its earnings as dividends. For example, if a company has a constant dividend payout ratio of 50%, it will distribute 50% of its earnings as dividends to shareholders. B) The constant dividend payout ratio policy is when a company pays out a fixed amount of dividends every year. C) The constant dividend payout ratio policy is when a company pays out dividends based on its current stock price. D) The constant dividend payout ratio policy is when a company pays out dividends only if it has excess cash flow. Show Answer Correct Answer: A) The constant dividend payout ratio policy is when a company pays out a fixed percentage of its earnings as dividends. For example, if a company has a constant dividend payout ratio of 50%, it will distribute 50% of its earnings as dividends to shareholders. 19. Which of the below is NOT the method of stock repurchase by a company A) Company buys its own stock in the open market. B) Company states a purchase price and a desired number of shares to be bought. C) Firm repurchases shares from specific individual shareholders. D) Firm force share holders to sell their stocks. Show Answer Correct Answer: D) Firm force share holders to sell their stocks. 20. In Q.2 what is Net Profit for Equity Shareholders A) 30 Lacs. B) 12 Lacs. C) 18 Lacs. D) None of these. Show Answer Correct Answer: C) 18 Lacs. ← PreviousNext →Related QuizzesDividend Policy Quiz 1Dividend Policy Quiz 2Dividend Policy Quiz 3Dividend 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