FIN 405 Chait Quiz 5 Dividends and Payouts

regular cash dividend

A cash payment made by a firm to its owners in the normal course of business

stock

A payment made by a firm to its owners in the form of new shares of stock is called a ________ dividend

A) Repurchase shares

Assume personal tax rates are lower than corporate tax rates. From a tax-paying shareholder point of view, how should a firm distribute its excess cash assuming it has funded all positive net present value projects? A) Repurchase shares B) Acquire another firm C) Purchase financial assets D) Increase cash dividends E) Increase executive compensati

B) High-tax-bracket individuals; low-payout stocks

Based on the concept of the clientele effect, which one of these combinations correctly aligns an investor group with its preferred type of stocks? A) Low-tax-bracket individuals; zero-to-low payout stocks B) High-tax-bracket individuals; low-payout stocks C) Corporations; low-to-medium payout stocks D) Tax-free institutions; low-payout stocks E) High-tax-bracket individuals; high-payout stocks

B) ex-dividend date.

Ignoring taxes, and all else equal, the market value of a stock will tend to decrease by the value of the dividend on the: A) dividend declaration date. B) ex-dividend date. C) date of record. D) date of payment. E) day after the date of payment.

ex-dividend

The date before which a purchaser of stock is entitled to receive a declared dividend, but on or after that date they cannot, is called the ________ date

B) causes stockholders to increase their expectations of future cash flows.

The information content effect implies that stock prices will rise when dividends are increased provided that the dividend increase: A) is denoted as a one-time event. B) causes stockholders to increase their expectations of future cash flows. C) is greater than the average historical dividend increase. D) is substantial in both dollar amount and percentage terms. E) is combined with a stock repurchase.

D) maintain a minimum share price as set by a stock exchange.

The principal reason that firms implement a reverse stock split is to: A) decrease the liquidity of a stock. B) decrease the market value per share. C) increase the number of stockholders. D) maintain a minimum share price as set by a stock exchange. E) raise additional capital from current stockholders

D) Declaration date, ex-dividend date, date of record

Which one of the following lists dividend events in the correct chronological order from earliest to latest? A) Date of record, declaration date, ex-dividend date B) Date of record, ex-dividend date, declaration date C) Declaration date, date of record, ex-dividend date D) Declaration date, ex-dividend date, date of record E) Ex-dividend date, date of record, declaration date

A) adjust the market price of a stock such that it falls within a preferred trading range.

Stock splits are often used to: A) adjust the market price of a stock such that it falls within a preferred trading range. B) decrease the excess cash held by a firm. C) increase both the number of shares outstanding and the market price per share. D) increase the total equity of a firm. E) adjust the debt-equity ratio such that it falls within a preferred rang