Question 1

You own 100 shares of stock in SplitsVille Corp. Over the past three days, SplitsVille has done the following: It first split its stock 2-for-1. One day later it declared a 100% stock dividend. After one more day it executed a 1-for-4 reverse split. If you did not buy or sell any shares in the firm over this period, how many shares of stock did you have after EACH transaction? What would you assume happened to the price of the firm's stock as a result of these activities?

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Question 2

What are some of the key factors, as ranked by financial executives, which affect company dividend decisions?

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Question 3

Provide a definition for the term target payout ratio.

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Question 4

Provide a definition for the term reverse split.

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Question 5

Provide a definition for the term information content effect.

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Question 6

Stock prices tend to increase after a stock split. What might cause this to occur?

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Question 7

Provide a definition for the term clientele effect.

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Question 8

List and briefly explain the five main goals (in order) of a compromise dividend policy.

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Question 9

Provide a definition for the term residual dividend approach.

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Question 10

Provide a definition for the term trading range.

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Question 11

Provide a definition for the term stock split.

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Question 12

A firm finds that it has an unusual amount of extra cash at the end of its fiscal year. It is considering pursuing one of the following as a means for distributing it to the shareholders. What are the pros and cons of each?
It could pay an extra cash dividend
It could increase its regular dividend
It can use the money to repurchase stock

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Question 13

Positive NPV projects enhance shareholder wealth. However, in some cases the payment of dividends limits the number of positive NPV projects a firm can take. Why, then, shouldn't shareholders prefer a residual dividend policy?

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Question 14

Suppose the tax laws were revised to exempt dividend income received by individuals from taxation. How would this change affect the dividend versus stock repurchase decision assuming all else is equal?

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Question 15

Provide a definition for the term repurchase.

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Question 16

Explain the meaning of the dividend clientele effect and why it is important.

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Quiz 17: Dividends and Dividend Policy