19/12/2023, 14:02 4th Module Assessment

Dashboard / My courses / Financial Management (FIBA601)-Semester II / #Module IV: Dividend Decision

/ 4th Module Assessment

Question 1

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Cash dividend refers to:

a. The distribution of cash to shareholders

b. The distribution of additional shares to existing shareholders
c. The conversion of dividends into additional shares
d. The splitting of existing shares into smaller units
Clear my choice

Question 2

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Bonus shares refer to:

a. Additional shares distributed to shareholders as dividends

b. Additional shares issued to raise additional capital
c. Additional shares issued for employee stock options
d. Additional shares purchased in the open market
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Question 3

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Factors determining dividend policy include:

a. Profitability and liquidity of the company

b. Stock price and market conditions
c. Taxation laws and regulatory requirements
d. All of the above
Clear my choice

Question 4

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The dividend decision refers to:

a. Determining the amount of dividend to be paid

b. Deciding whether to pay dividends or reinvest earnings
c. Choosing the form of dividend payment
d. Evaluating the impact of dividends on stock price
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Question 5

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The bird-in-hand theory of dividend policy suggests that investors prefer:

a. Higher dividends today rather than uncertain capital gains in the future
b. Lower dividends today in exchange for potential capital gains in the future
c. Dividends paid in the form of additional shares rather than cash
d. Dividends paid irregularly based on company performance
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19/12/2023, 14:02 4th Module Assessment

Question 6

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Dividend policies can impact a company's stock price because they:

a. Affect investor perceptions of the company's financial health

b. Determine the total amount of cash available for investment
c. Determine the cost of equity capital
d. Influence the company's capital structure
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Question 7

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Dividend reinvestment plans (DRIPs) allow shareholders to:

a. Receive dividends in the form of additional shares

b. Purchase additional shares using dividend payments
c. Convert cash dividends into cash equivalents
d. Sell shares to the company at a predetermined price
Clear my choice

Question 8

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Stock split refers to:

a. The distribution of additional shares to existing shareholders

b. The distribution of cash to shareholders
c. The conversion of dividends into additional shares
d. The splitting of existing shares into smaller units
Clear my choice

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19/12/2023, 14:02 4th Module Assessment

Question 9

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The dividend policy that pays dividends only when there are excess earnings after meeting all investment needs is known
as:

a. Stable dividend policy

b. Residual dividend policy
c. Constant dividend policy
d. Irregular dividend policy
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Question 10

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The information signaling theory suggests that dividend changes:

a. Convey information about a company's future prospects

b. Have no impact on investor perceptions or stock price
c. Are driven solely by tax considerations
d. Indicate a company's willingness to raise additional capital
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Question 11

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The Modigliani-Miller (MM) hypothesis suggests that:

a. Dividend policy has no impact on the value of a firm

b. High dividend payouts increase the value of a firm
c. Low dividend payouts increase the value of a firm
d. Dividend policy is determined by market forces
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19/12/2023, 14:02 4th Module Assessment

Question 12

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The Gordon model of dividend decisions emphasizes the relationship between:

a. Dividend growth rate and stock price

b. Dividend yield and earnings per share (EPS)
c. Dividend payout ratio and return on investment (ROI)
d. Dividend payout ratio and cost of equity
Clear my choice

Question 13

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The Walter model of dividend decisions focuses on the relationship between:

a. Dividend payout ratio and earnings per share (EPS)

b. Dividend payout ratio and stock price
c. Dividend payout ratio and return on investment (ROI)
d. Dividend payout ratio and cost of equity
Clear my choice

Question 14

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The clientele effect in dividend policy refers to:

a. Companies targeting specific groups of investors with dividend policies

b. Companies adjusting dividend policies based on changing investor preferences
c. Companies attracting investors by offering high dividend payouts
d. Companies repurchasing shares to increase dividend per share
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19/12/2023, 14:02 4th Module Assessment

Question 15

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

a. Ke > g
b. Retention ratio (b),once decide upon, is constant
c. Firm is an all equity firm
d. All of the above
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Question 16

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

a. 5%
b. 7%
c. 6.40%
d. 9.60%
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Question 17

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What should be the optimum Dividend pay-out ratio, when r = 15% & Ke = 12%:

a. 100%
b. 50%
c. Zero
d. None of the above.
Clear my choice

◄ Test Your Understanding_4.16_Dividend policies in practice 

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