Business Studies Chps 10 to 12 (Review)

In a company, the wealth created is reflected in the

• Dividends declared
• Dividend growth
• Market value of shares
• Asset value

Dividend decisions are concerned with:

• Determination of quantum of profits to be distributed to owners
• Frequency of dividend payments
• Amounts to be retained by the company
• All of the above

When a company sells its shares directly to a small group of investors like banks and financial institutions, it is called:

• Public issue
• Private placement
• Rights issue
• Bonus issue

Working capital refers to the excess of:

• Current liabilities over current assets
• Current assets over current liabilities
• Fixed assets over current liabilities
• Fixed assets over current assets

Which of the following is a component of working capital?

• Land and buildings
• Debtors
• Machinery
• Long-term loans

A high geared company is exposed to:

• Business risk
• Financial risk
• Inflation risk
• All of the above

How does raising long-term funds through debt affect the return on shareholders' funds?

• It decreases the return due to interest payments
• It increases the return due to leverage effect
• It has no effect on return
• It decreases the return due to dividend payments

What is meant by 'leverage'?

• Use of borrowed funds to increase return on equity
• Investment in fixed assets
• Distribution of dividends
• Retaining profits in the business

Which of the following is NOT a type of leverage?

• Operating leverage
• Financial leverage
• Dividend leverage
• Combined leverage

What does information signaling in dividend decision imply?

• Dividend announcements convey information about company’s future prospects
• Dividends are paid only to preference shareholders
• Dividend payments are always fixed
• Dividend decisions do not affect share price