Finance Final chapter 13

Which of the following is a commonly used dividend policy?

Constant-payout-ratio

Which of the following is a good reason for a firm to repurchase stock?

Enhancing shareholder value

A company may pay a(n) ______ dividend when earnings are higher than normal in a given period.

Extra

The residual theory of dividends suggests that dividends are __________ to the value of the firm.

Irrelevant

__________ policy is when the firm pays out a fixed dollar dividend each period.

Regular dividend

The term _____ may refer to the par value of common stock or the sum of the par value and paid-in capital in excess of par for common stock, depending upon the state of incorporation.

legal capital

Companies that adopt a ______ dividend policy seek to provide a constant dividend with an additional amount earnings are higher than normal in a given period.

low-regular-and-extra

The dividend signaling hypothesis would interpret a cut in dividends as a __________.

negative signal

Pear Computer Imaging announced that it will pay a $2.00 per share dividend. The firm will pay the dividend to all shareholders __________.

of record on the date of record

A __________ lowers the market price of a firm's stock by increasing the number of shares outstanding.

stock split

When common stock is repurchased and retired, the underlying motive is to __________.

distribute excess cash to the owners

Modigliani and Miller argue that __________.

dividends are irrelevant to investors' valuation of the firm

During the 2007-2009 recession dividends:

fell less than earnings.

A company might initiate a stock split to __________.

keep the share price in an optimal trading range

__________ is the most common way for a firm to repurchase shares.

An open-market repurchase

A stock repurchase method where the firm specifies the number of shares it is willing to buy back at various prices and then allows investors to indicate how many shares they will sell at each price is the process used in a __________.

Dutch auction repurchase

According to the bird-in-the-hand argument, investors believe current dividends:

are less risky than future cash distributions.

In general, firms with rapid growth:

are more likely to issue stock dividends.

Dividend reinvestment plans, or DRIPs, often allow stockholders use dividend proceeds to buy additional shares of the firm's stock:

at prices below the current market price.

The payment of cash dividends to corporate stockholders is decided by the __________.

board of directors

According to __________ theory investors have a fluctuating demand for dividends over time that often differs based on economic or market conditions.

catering

Different payout policies will attract different types of investors due to the _______.

clientele effect

Consistent Corporation has a policy of paying out 12% of earnings to stockholders in the form of a dividend. It appears that Consistent has a ______ dividend policy.

constant-payout-ratio