Dividend Policy

Retained earnings are

• an indication of a company's liquidity.

• the cumulative earnings of the company after dividends

• the same as cash in the bank.

• not important when determining dividends.

Which of the following is an argument for the relevance of dividends?

• Informational content

• Reduction of uncertainty.

• Some investors' preference for current income.

• All of the above.

If Ian O'Connor Enterprises, Inc., repurchased 50 percent of its outstanding common stock from the open (secondary) market, the result would be

• a decline in EPS.

• an increase in cash.

• a decrease in total assets.

• an increase in the number of stockholders.

The dividend payout ratio is equal to

• the dividend yield plus the capital gains yield.

• dividends per share divided by earnings per share

• dividends per share divided by par value per share.

• dividends per share divided by current price per share.

Which one of the following is a payment of either cash or shares of stock that is paid out of earnings to a firm's shareholders

• Interest

• Distribution

• Retained earning

• Dividend

Which one of the following best defines a regular cash dividend?

• Distribution by a firm to its shareholders

• Payment from any source by a firm to its owners

• One-time payment of cash by a firm to its shareholders

• Cash payment by a firm to its owners as part of a firm's normal operations

This morning, Lambert Materials bought 10,000 of its outstanding shares in the open market. What type of transaction was this?

• Stock payout

• Stock repurchase

• Stock distribution

• Stock dividend

Which one of the following increases the number of shares outstanding but does not increase the value of owner's equity?

• Stock split

• Reserve stock split

• Stock repurchase

• Cash distribution

Dividend policy determines:

• (A) what portion of earnings will be paid out to stock holders

• (B) what portion will be retained in the business to finance long-term growth.

• (C) Only (A) not (B)

• (D) Both (A) and (B)

Dividend constitutes the cash flow that accrues to -…………..

• Bond holder

• Equity holder

• Debt holder

• Bank