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Dividend Decision Module4 QA

The document contains a series of questions and answers related to dividend decisions in financial management. Key concepts discussed include the residual theory of dividends, Gordon's model, and factors influencing dividend policy. It also addresses various dividend payment policies and their implications for shareholder wealth.

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21 views2 pages

Dividend Decision Module4 QA

The document contains a series of questions and answers related to dividend decisions in financial management. Key concepts discussed include the residual theory of dividends, Gordon's model, and factors influencing dividend policy. It also addresses various dividend payment policies and their implications for shareholder wealth.

Uploaded by

gauravprohike
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Module IV: Dividend Decision - Questions and Answers

1. Q: he residual theory of dividends suggests that dividends are_________ to the value

of the firm

A: relevant

2. Q: Mature companies having few investment opportunities will show high pay out

ratios, this statement is:

A: TRUE

3. Q: Which one of the following is the assumption of Gordon’s Model:

A: All of the above

4. Q: Which of the following is the limitation of Linter’s model:

A: This model does not offer a market price for the shares

5. Q: Page 1 Untitled Which one of the following activities is outside the purview of

dividend decision in financial management?

A: Deciding on the pay-out ratio

6. Q: Which of the following is the irrelevance theory?

A: Gordon model

7. Q: Some company may pay dividend in the form of asset that it is holing and which is

superfluous for it is called ____________dividend.

A: Optional

8. Q: What should be the optimum Dividend pay-out ratio, when r =15% & K e = 12%:

A: 100%

9. Q: If the company’s D/P ratio is 60% & ROI is 16%, what should be the growth rate:

A: 7%
10. Q: Which type of dividend payment policy has the advantage that if the firm’s

earnings drop, dividends will still be maintained at are latively constant level?

A: none of the above

11. Q: When the firm does not pay out fixed dividend regularly, it is_____ dividend

policy.

A: No immediate

12. Q: The factors involved in setting a dividend policy include all of the following

EXCEPT

A: capital impairmentrestrictions.

13. Q: Modigliani and Miller, recognizing that dividends do some how affect stock

prices, suggest that positive effects of dividendincreases are attributable

A: not to the dividend itself but to the informational content of the dividends with

14. Q: Gordon’s “bird-in-the-hand” argument suggests that

A: dividends are irrelevant

15. Q: The dividend policy must be formulated considering two basic objectives, namely

A: maximizing shareholder wealth and delaying the tax liability of the stockholder.

16. Q: The purpose of a stock split is to

A: enhance the trading activity of the stock by lowering the market price

17. Q: At the quarterly meeting of Tangshan Mining Corporation, he don September

10th, the directors declared a $1.00 per share dividend for the firm’s 100,000 shares of

common stock outstanding. The net effect of declaring and paying this dividend would

be to

A: decrease total assets by $100,000 and decrease stockholders equity by $100,000.

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