Corporate Payout Policies Quiz

Stable dividend policy ensures consistent and anticipated dividend disbursements.

Dividend payout ratio measures the proportion of earnings paid out as dividends.

In many countries, dividends are taxed at a preferential rate compared to regular income.

Dividend yield indicates the annual dividend income relative to the current market price of the stock.

Retention ratio denotes the portion of earnings retained by the company for reinvestment purposes.

Dividend policy involves determining the amount and frequency of dividend payments to shareholders.

Cash dividends decrease the amount of cash available within the company.

The clientele effect suggests that different types of shareholders have distinct preferences for dividend income over capital gains.

Stock buyback involves a company repurchasing its own outstanding shares from the open market.

Various factors, including company's financial health, growth prospects, and shareholder preferences, are considered while formulating dividend policy.

Special dividends are issued by companies to distribute excess profits or reward shareholders for extraordinary performance.

DRIP allows shareholders to automatically reinvest dividends back into additional shares of the company's stock.

Stock dividend involves distributing additional shares of stock to existing shareholders instead of cash.

According to Modigliani and Miller, a firm's dividend policy does not affect its market value under certain assumptions.

The bird-in-the-hand theory suggests that investors value dividends more than potential future capital gains due to uncertainty.

Companies may increase dividend payout ratio when they have robust cash flows and earnings.

Ex-dividend date is the day when shares trade without the right to receive the forthcoming dividend.

Dividend coverage ratio measures the company's ability to pay dividends from its earnings.