#1
Which of the following is a characteristic of a stable dividend policy?
Regular and predictable dividend payments
Dividend payments fluctuate widely each year
Dividends are paid irregularly
Dividends are never paid
#2
What is the dividend payout ratio?
Dividends per share divided by earnings per share
Dividends per share multiplied by earnings per share
Earnings per share divided by dividends per share
Total dividends paid divided by total earnings
#3
What is the tax treatment of dividends received by shareholders in many countries?
Dividends are taxed at a lower rate than ordinary income
Dividends are taxed at a higher rate than ordinary income
Dividends are tax-exempt
Dividends are subject to a flat tax rate
#4
What does the term 'dividend yield' represent?
The ratio of dividends per share to stock price
The total dividends paid by a company
The amount of dividends reinvested by shareholders
The percentage of profits distributed as dividends
#5
What is the retention ratio?
The percentage of earnings retained by the company
The percentage of earnings distributed as dividends
The percentage of earnings invested in new projects
The percentage of earnings used to pay off debt
#6
What is a dividend policy?
The process of setting dividend payment dates
The process of deciding how much to pay in dividends
The process of issuing dividends to preferred shareholders
The process of calculating the dividend yield
#7
Which of the following is a disadvantage of a cash dividend?
It reduces the company's cash balance
It increases shareholder wealth
It encourages long-term investment
It has no effect on shareholder value
#8
What is the clientele effect in relation to dividend policy?
Shareholders prefer dividends to capital gains
Shareholders prefer capital gains to dividends
Shareholders have no preference between dividends and capital gains
Dividend policy has no impact on shareholder behavior
#9
What is a stock buyback?
When a company sells its stocks on the open market
When a company purchases its own shares from the market
When a company issues new shares to the public
When a company splits its shares
#10
Which of the following is a consideration for a company when deciding its dividend policy?
Investment opportunities
Shareholder preferences
Legal constraints
All of the above
#11
Which of the following is a reason why companies might choose to pay a special dividend?
To reward shareholders for exceptional performance
To meet legal requirements
To maintain a stable dividend policy
To conserve cash
#12
What is a dividend reinvestment plan (DRIP)?
A plan where dividends are automatically reinvested to purchase more shares
A plan where dividends are paid in cash to shareholders
A plan where dividends are donated to charity
A plan where dividends are withheld by the company
#13
What is a stock dividend?
A dividend paid in cash
A dividend paid in additional shares of stock
A dividend paid in bonds
A dividend paid in property
#14
What is the significance of the dividend irrelevance theory proposed by Modigliani and Miller?
Dividend policy has no impact on a firm's value
Dividend policy is the primary determinant of a firm's value
Dividend policy influences a firm's value only in certain circumstances
Dividend policy is more important than investment decisions
#15
What is the bird-in-the-hand theory of dividends?
Investors prefer dividends now rather than uncertain capital gains in the future
Investors prefer capital gains now rather than uncertain dividends in the future
Investors prefer high-dividend stocks to low-dividend stocks
Investors prefer low-dividend stocks to high-dividend stocks
#16
Which of the following is a factor that may influence a company's decision to increase its dividend payout ratio?
Strong cash flow and earnings
High levels of debt
Low profitability
Decreasing shareholder demand for dividends
#17
What is the ex-dividend date?
The date when dividends are declared by the board of directors
The date when dividends are paid to shareholders
The date when shares trade without the right to receive the upcoming dividend
The date when dividends are reinvested in the company
#18
What is the dividend coverage ratio?
The ratio of dividends per share to earnings per share
The ratio of dividends per share to stock price
The ratio of earnings per share to dividends per share
The ratio of earnings per share to stock price