WorksheetsDividend Decision
Total questions: 15
Worksheet time: 12mins
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
Only (A) not (B)
Both (A) and (B)
Dividend constitutes the cash flow that accrues to
Creditors
Equity holders
Bond holders
All
Retained earnings are
An indication of a company’s liquidity
The same as cash in the bank.
Not important when determining dividends.
The cumulative earnings of the company after dividends.
All of the following are true of stock splits except:
Market price per share is reduced after the split.
The number of outstanding shares is increased
Retained earnings are changed
Proportional ownership is unchanged
The repurchase of stock is considered …………. decision rather than ……….. decision
an investment; a financing
financing; an investment
an investment; a dividend
a dividend; a financing
If Jubilant foods buyback ten percent of its outstanding common stock from the 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 stock-holders.
Payout ratio is subtracted from one to calculate
Growth ratio
Present value ratio
Retention ratio
Future value ratio
A stock split will cause a change in the toted amounts shown in which of the following balance sheet accounts?
Cash
Common stock
Paid-in capital
None of the above
You currently own 100 shares of stock in Baba Ltd. The stock currently trades at ₹ 120 a share. The company is contemplating a 2:1 stock split. Which of the following best describes your position after the proposed stock split takes place?
You will have 200 shares of stock, and the stock will trade at or near ₹120 a share.
You will have 200 shares of stock, and the stock will trade at or near ₹60 a share.
You will have 100 shares of stock, and the stock will trade at or near ₹60 a share.
You will have 50 shares of stock, and the stock will trade at or near ₹60 a share.
Modigliani and Miller argue that the dividend decision
is irrelevant as the value of the firm is based on the earning power of its assets.
is relevant as the value of the firm is not based just on the earning power of its assets.
is irrelevant as dividends represent cash leaving the firm to shareholders, who own the firm anyway.
is relevant as cash outflow always influences other firm decisions
Dividend policy is determined by the
Shareholders in AGM
CEO of the company
Board of directors
Ministry of Corporate Affairs
Which of the following is correct formula to calculate P/E Ratio?
Market Price ÷ EPS
EPS ÷ Market Price
PAT ÷ EPS
EPS ÷ PAT
Stock dividend is also known as
Bond dividend
Bonus shares
Rights shares
Property dividend
The dividend irrelevance theorem to share valuation was propounded by
James E Walter
Myron Gordon
Modigliani & Miller
None
The dividend payout ratio is equal to
Dividend per share divided by EPS
Dividend per share divided by face value per share
Dividend per share divided by market price per share
Cost of capital plus dividend yield
