This quiz works best with JavaScript enabled. Home > Finance > Corporate Finance > Dividend Policy – Quiz 4 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Dividend Policy Quiz 4 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Which one of the following best defines a regular cash dividend? A) Cash payment by a firm to its owners as part of a firm's normal operations. B) One-time payment of cash by a firm to its shareholders. C) Distribution by a firm to its shareholders. D) Payment from any source by a firm to its owners. Show Answer Correct Answer: A) Cash payment by a firm to its owners as part of a firm's normal operations. 2. 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. 3. 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. 4. 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) RM13, 750. C) RM101, 222. D) RM26, 666.67. Show Answer Correct Answer: A) RM3, 750. 5. 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. 6. 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. 7. 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. 8. 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. 9. 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. 10. If an individual stockholder reinvests dividends under a company's dividend reinvestment plan, the reinvested dividends are A) Taxable to the shareholder. B) Not taxable to the shareholder. Show Answer Correct Answer: B) Not taxable to the shareholder. 11. In retention growth method, percent of net income firms usually payout as shareholders dividend is classified as A) Growth retention ratio. B) Present value of ratio. C) Payback ratio. D) Payout ratio. Show Answer Correct Answer: D) Payout ratio. 12. Dividend is that part of profit after tax which is ..... to the ..... of the company A) Retained, shareholders. B) Distributed, company. C) Distributed, Shareholders. D) None of these. Show Answer Correct Answer: C) Distributed, Shareholders. 13. One of the condition stated in the loan contract is the firm can pay dividends when it has fully settled the loan principal. This example BEST describes the ..... of dividend policy. A) Legal constraints. B) Inflation. C) Liquidity and cash flow considerations. D) None of above. Show Answer Correct Answer: A) Legal constraints. 14. What are the factors that influence dividend policy? A) The factors that influence dividend policy include company profitability, cash flow, growth opportunities, tax considerations, and shareholder preferences. B) The number of employees who carpool to work. C) The color of the company logo. D) The CEO's favorite food. Show Answer Correct Answer: A) The factors that influence dividend policy include company profitability, cash flow, growth opportunities, tax considerations, and shareholder preferences. 15. To receive the upcoming dividend, shareholders must have bought the stock before the ..... A) Announcement date. B) Ex dividend date. C) Payment date. D) Date of record. Show Answer Correct Answer: B) Ex dividend date. 16. If the price of the securities sold falls during the underwriting period, the underwriter buys the stocks in the market to stabilize the price, which is an illegal price manipulation. A) Error. B) Correct. Show Answer Correct Answer: A) Error. 17. The company's annual operations have to pay? tax. Individuals who own company stocks and distribute dividends have to pay? tax. A) Company income; personal income. B) Personal income; company income. C) Double benefit; simple benefit. D) Overall; individual. E) Before tax; after tax. Show Answer Correct Answer: A) Company income; personal income. 18. Below that is not an activity of the company to financial management decisions is ..... A) Operating Activites. B) Financing Activities. C) Production Activities. D) Investing Activities. Show Answer Correct Answer: C) Production Activities. 19. If Ian O'Connor Enterprises, Inc., repurchased 50 percent of its outstanding common stock from the open (secondary) market, the result would be A) A decline in EPS. B) A decrease in total assets. C) An increase in cash. D) An increase in the number of stockholders. Show Answer Correct Answer: B) A decrease in total assets. 20. In Walter model formula, D stands for A) Dividend earning. B) Direct dividend. C) Dividend per share. D) Indirect dividend. Show Answer Correct Answer: C) Dividend per share. 21. Which of the following can be described as a measure of capital structure? A) Ratio of debt funds to equity funds. B) Liabilities/Assets. C) Liabilities/Equity. D) All of the above. E) Only a and c. Show Answer Correct Answer: D) All of the above. 22. Dividends are paid out of A) Gross profit. B) General reserve. C) Profit after tax. D) Accumulated profits. Show Answer Correct Answer: C) Profit after tax. 23. In Q.1 MP is highest when dividend payout is A) Nil. B) 50 %. C) 25 %. D) 100 %. Show Answer Correct Answer: A) Nil. 24. In order to calculate Weighted Average Cost of weights may be based on: A) Market values. B) Book values. C) Both. D) None. Show Answer Correct Answer: A) Market values. 25. Which is not the type of dividend payment? A) Bonus issue. B) Share split. C) Right issue. D) None of the above. Show Answer Correct Answer: B) Share split. 26. In Q.2 what is Earning per share A) Rs. 6. B) Rs. 10. C) Rs.4. D) None of these. Show Answer Correct Answer: A) Rs. 6. 27. What are the different types of dividend policies? A) No dividend policy. B) The different types of dividend policies include stable dividend policy, constant dividend payout ratio policy, residual dividend policy, and hybrid dividend policy. C) Variable dividend policy. D) Increasing dividend policy. Show Answer Correct Answer: B) The different types of dividend policies include stable dividend policy, constant dividend payout ratio policy, residual dividend policy, and hybrid dividend policy. 28. MM's first proposal asserts that under the assumption of no corporate income tax, the more debt a company borrows, the lower its value will be. A) Untrue. B) True. Show Answer Correct Answer: A) Untrue. 29. MM's third proposal contends that under the assumption of corporate income tax, if managers want to maximize the value of the company, they should not borrow more. A) True. B) Untrue. Show Answer Correct Answer: B) Untrue. 30. What is dividend policy? A) Dividend policy is the company's approach to managing its employees. B) Dividend policy is the company's strategy for marketing its products. C) Dividend policy is the company's plan for borrowing money. D) Dividend policy refers to the approach or strategy that a company uses to determine how much of its earnings it will pay out to shareholders in the form of dividends. Show Answer Correct Answer: D) Dividend policy refers to the approach or strategy that a company uses to determine how much of its earnings it will pay out to shareholders in the form of dividends. ← PreviousNext →Related QuizzesFinance QuizzesDividend Policy Quiz 1Dividend Policy Quiz 2Dividend Policy Quiz 3Dividend Policy Quiz 5Capital Structure QuizWorking Capital Management Quiz 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books