This quiz works best with JavaScript enabled. Home > Corporate Finance > Dividend Policy – Quiz 5 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Dividend Policy Quiz 5 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Firm Pickemon, Inc. has had earnings of RM3.20, RM3.00, and RM5.50 per share for the past three years. The firm anticipates maintaining the same dividend policy this year as the past three years. That dividend policy has resulted in dividends per share of RM1.28, RM1.20, and RM2.20 for the past three years. It is anticipated that the next year will result in a large increase in earnings to RM9.80 per share. What dividend do you expect the firm to pay in the next year? A) RM3.92. B) RM1.56. C) RM3.12. D) RM4.68. Show Answer Correct Answer: A) RM3.92. 2. Investors own shares, but don't get dividends, what profits can the owner of these shares get? A) Retained earning. B) Dividends. C) Stock split. D) Capital gain. Show Answer Correct Answer: D) Capital gain. 3. To handle an IPO, the issuing company must pay a considerable management fee, said A) Necessary issuance costs. B) Indirect issuance costs. C) Direct issuance costs. D) Total issuance cost. E) None of the above. Show Answer Correct Answer: C) Direct issuance costs. 4. In Q.2 what is Market price of Equity share when dividend payout is 50 % A) Rs.50. B) Rs. 37.50. C) Rs. 150. D) None of these. Show Answer Correct Answer: A) Rs.50. 5. "The size of the dividend payment has no influence on investors" A) Bird in the hand theories. B) Tax Preference theories. C) Dividends are irrelevant theories. D) Dividend Policy. Show Answer Correct Answer: C) Dividends are irrelevant theories. 6. Dividend can be distributed in which all forms A) Cash dividend. B) Stock dividend (Bonus shares). C) Both (a) and (b). D) None of these. Show Answer Correct Answer: C) Both (a) and (b). 7. Constant payout ratio means: A) Declaration same bonus ratio every year. B) The payment of fixed percentage of earning as dividend every year. C) Constantly paying same dividend if EPS is same for all the year. D) None of the above. Show Answer Correct Answer: B) The payment of fixed percentage of earning as dividend every year. 8. The explicit or implicit decision of the Board of Directors regarding the amount of residual earnings (past or present) that should be distributed to the shareholders of the corporation is called ..... A) Retained Earning. B) Dividend Policy. C) Bird in Hand. D) Agency Theory. Show Answer Correct Answer: B) Dividend Policy. 9. MM's second proposal contends that under the assumption of no corporate income tax, if the D/E ratio increases, the cost of equity capital remains unchanged. A) True. B) Untrue. Show Answer Correct Answer: B) Untrue. 10. The theory that asserts that corporate value has nothing to do with capital structure is A) Capital asset pricing model. B) MM's first proposal. C) MM's second proposal. D) Portfolio theory. E) Efficient Market Hypothesis. Show Answer Correct Answer: B) MM's first proposal. 11. 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. Show Answer Correct Answer: D) Cash payment by a firm to its owners as part of a firm's normal operations. 12. Which of the following is an advantage of internal corporate financing? A) It can avoid outside scrutiny, so it is better to maintain the confidentiality of business strategies. B) More convenient and flexible in the use of funds. C) No need to pay securities issuance costs. D) Avoid asymmetric information problems arising from the issuance of equity securities. E) All of the above. Show Answer Correct Answer: E) All of the above. 13. The following are included in dividend policy theory, except..... A) Dividend Irrelevance Theory. B) Bird-in-the-Hand Theory. C) Tax Preference Theory. D) Modigliani-Miller Theory. Show Answer Correct Answer: D) Modigliani-Miller Theory. 14. RTK Sdn Bhd has common stock of RM10, 000. How many shares will be outstanding if the RTK Sdn Bhd initiate a 3-for-8 reverse stock split? A) RM3, 750. B) RM26, 666.67. C) RM13, 750. D) RM101, 222. Show Answer Correct Answer: A) RM3, 750. 15. Which of the following would be considered an internal source of financing? A) Retained earnings. B) Accounts payable. C) Accumulated wages. D) All of the above. E) None of the above. Show Answer Correct Answer: D) All of the above. 16. What is the significance of dividend payout ratio in dividend policy? A) The dividend payout ratio has no impact on the company's ability to grow. B) Dividend payout ratio is irrelevant in determining the company's financial health. C) The dividend payout ratio is significant in dividend policy as it indicates the proportion of earnings that are being distributed to shareholders as dividends, which can impact the company's ability to reinvest in growth or pay off debt. D) Dividend payout ratio only affects the company's stock price. Show Answer Correct Answer: C) The dividend payout ratio is significant in dividend policy as it indicates the proportion of earnings that are being distributed to shareholders as dividends, which can impact the company's ability to reinvest in growth or pay off debt. 17. In case of partially debt-financed firm, WACC is less than A) Rd. B) Re. C) Both. D) None. Show Answer Correct Answer: A) Rd. 18. If the investor receives dividends, the investor must incorporate the dividends into salary income and declare A) Profit income tax. B) Capital gains tax. C) General income tax. D) All of the above. E) None of the above. Show Answer Correct Answer: C) General income tax. 19. Myron Gordon believe that the required return on equity increases as the dividend payout ratio is decreased. Their argument is based on the assumption that A) Investors are indifferent between dividends and capital gains. B) Investors require that the dividend yield and capital gains yield equal a constant. C) Capital gains are taxed at a higher rate than dividends. D) Investors view dividends as being less risky than potential future capital gains. Show Answer Correct Answer: D) Investors view dividends as being less risky than potential future capital gains. 20. If an individual stockholder reinvests dividends under a company's dividend reinvestment plan, the reinvested dividends are A) Not taxable to the shareholder. B) Taxable to the shareholder. Show Answer Correct Answer: A) Not taxable to the shareholder. ← PreviousNext →Related QuizzesDividend Policy Quiz 1Dividend Policy Quiz 2Dividend Policy Quiz 3Dividend Policy Quiz 4Dividend Policy Quiz 6Dividend Policy Quiz 7Dividend Policy Quiz 8Capital Structure QuizWorking Capital Management Quiz 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books