Payout Policy

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Question 1

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True/False

Stocks that are purchased on the record date are not entitled to the dividend.

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Question 2

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True/False

Anyone holding a stock before its ex-dividend date is entitled to the dividend.

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Question 3

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True/False

Companies can pay out cash to their shareholders in two ways.They can pay a dividend or they can buy back some of their outstanding shares.

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Question 4

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True/False

In recent years more than half of U.S.corporations did not pay a dividend nor did they repurchase shares.

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Question 5

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True/False

Over the past 30 years stock repurchases have become an increasingly popular way of paying out cash.

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Question 6

True/False

In a three-for-two stock split,each investor would receive one additional share for each two shares already held.

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Question 7

True/False

Many companies offer their shareholders an automatic dividend reinvestment plan.This means that the shareholders automatically receive the dividend on the payment date.

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Question 8

True/False

Dividends are paid to all shareholders who are recorded in its books on the payment date.

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Question 9

True/False

Dividends are paid to all shareholders who are recorded in its books on the record date.

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Question 10

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A two-for-one stock split is like a 200% stock dividend

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Question 11

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Investors often interpret a stock split announcement as a signal of management's confidence in the future.

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Question 12

True/False

A stock split will affect the stock's price,while a stock dividend will not.

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Question 13

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Stock repurchases are more volatile than dividends.

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Question 14

True/False

The share price declines when a stock repurchase occurs.

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Question 15

True/False

Dividends are likely to shift up and down as earnings fluctuate so that managers can maintain a stable payout ratio.

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Question 16

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Corporate dividends are less volatile than corporate earnings.

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Question 17

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MM's dividend irrelevance proposition assumes an efficient market with no taxes or issue costs.

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Question 18

True/False

According to the MM dividend irrelevance proposition,since investors do not need dividends to convert their shares to cash,they will not pay higher prices for firms with higher dividend payouts.

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Question 19

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The most common way that companies buy back their stock is to buy it in the market just like any other investor.

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Question 20

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The information content of dividends says that dividend increases send good news about cash flow and earnings,while dividend cuts send bad news.

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