Question 1

Dividend reinvestment plans are a convenient means to encourage individuals to save.​

Accepted Answer

Dividend reinvestment plans allow individuals to reinvest their dividends back into the same company's stock, which can encourage long-term savings and compound interest.

Question 2

If a stock's price is $90 and the stock is split three for one, the price becomes

Accepted Answer

In a three for one stock split, each share is divided into three, so the price of each new share is one-third of the original price. Therefore, $90 divided by 3 equals $30.

Question 3

Stock dividends increase the wealth of stockholders who receive additional shares. l> ​

Accepted Answer

Stock dividends do not increase the wealth of stockholders immediately because they simply redistribute the company's existing equity among a larger number of shares, maintaining the overall market value but diluting the value of each individual share.

Question 4

A company may pay
1) a regular quarterly cash dividend
2) stock dividends
3) no dividends​

Accepted Answer

A company has the option to pay a regular quarterly cash dividend, stock dividends, or choose to pay no dividends at all, depending on its financial health, strategic goals, and board of directors' decisions.

Question 5

Which of the following is equity?
1) investments
2) additional paid‑in capital
3) retained earnings

Accepted Answer

Equity refers to the portion of a company's value or assets that is owned by shareholders or investors. In accounting, equity is represented by various accounts on the balance sheet, including investments, additional paid-in capital, and retained earnings. Therefore, options 2 and 3, which are additional paid-in capital and retained earnings, respectively, represent equity. Option 1, which is investments, could be equity or an asset depending on the nature of the investment, but it is not always considered equity. Therefore, option C, which includes 2 and 3, is the best choice for equity.

Question 6

Dividend reinvestment plans permit stockholders to defer income taxes on dividends.​

Accepted Answer

Dividend reinvestment plans (DRIPs) allow shareholders to use dividends to purchase more shares of the stock, but this does not defer income taxes on the dividends; shareholders are still taxed on the dividends as if they had received them in cash.

Question 7

A reserve split should raise the per share price of a stock but not it total value.​

Accepted Answer

A reverse split reduces the number of shares outstanding, increasing the per share price, but the total market capitalization remains unchanged.

Question 8

​A stock split

Accepted Answer

A stock split does not directly affect a company's balance sheet in terms of equity, capital gains, or retained earnings. It simply increases the number of shares outstanding while proportionally decreasing the price per share, leaving the overall market capitalization and the balance sheet unchanged. Therefore, it does not affect liabilities.

Question 9

Which of the following are true concerning dividend reinvestment plans?
​1) taxes are deferred
2) they offer stockholders a convenient means to save
3) the firm may pay the brokerage and other fees associated with the plans

Accepted Answer

2) Dividend reinvestment plans offer stockholders a convenient way to reinvest dividends into additional shares of the company, often without having to pay brokerage fees. 3) Firms often cover the brokerage and other fees associated with these plans, making them an attractive option for investors. Taxes on dividends are not deferred; they are typically taxed in the year they are received, even if they are reinvested.

Question 10

​Stock repurchases

Accepted Answer

Stock repurchases reduce the number of outstanding shares, which increases the earnings per share. Therefore, choice A is correct. Choices B, C, and D are incorrect.

Question 11

The retention of earnings instead of paying dividends

Accepted Answer

Retention of earnings instead of paying dividends may result in greater growth and higher stock prices. This is because the company can reinvest the earnings back into the business to fund expansion and innovation, which can ultimately lead to increased profits and stock value. This can be beneficial for stockholders who are looking for long-term growth and capital appreciation.

Question 12

Stock repurchases reduce​
1) total equity
2) total assets
3) corporate taxes
4) total liabilities

Accepted Answer

Stock repurchases reduce the total equity of the company as shares are bought back from shareholders, leading to a decrease in outstanding shares. This also results in a decrease in total assets, as cash is used to buy the shares. Corporate taxes and total liabilities are not necessarily affected by stock repurchases.

Question 13

A stock dividend causes the firm's​

Accepted Answer

A stock dividend does not affect the firm's liabilities; it only involves the distribution of additional shares to shareholders, which does not change the firm's liabilities.

Question 14

A stock dividend

Accepted Answer

A stock dividend does not affect the firm's cash, total equity, or assets directly. However, it increases the number of shares outstanding, which typically results in a decrease in the stock price per share due to the dilution of ownership, assuming the market value of the company remains constant.

Question 15

Dividends may be paid in
1) cash
2) stock
3) retained earnings

Accepted Answer

Dividends can be paid in the form of cash or stock. Retained earnings are simply the profits that the company has kept for future investments and do not represent a form of dividend payment.

Question 16

Dividend reinvestment plans are​

Accepted Answer

Dividend reinvestment plans are a convenient means to accumulate shares by automatically reinvesting the dividends received from the company into additional shares of the stock, often without any fees or commissions. They do not necessarily defer federal income taxes on the dividends, and they are not dependent on the corporation distributing stock dividends. In fact, dividend reinvestment plans can often be more cost-effective than buying the stock through brokers.

Question 17

Management may prefer not paying dividends to​

Accepted Answer

Management may choose not to pay dividends in order to use the earnings to finance growth and increase the value of their shares. This allows for the company to reinvest earnings and potentially generate even more profits in the future, leading to a higher stock price and increased shareholder value.

Question 18

Dividends come at the expense of

Accepted Answer

Dividends are payments made to shareholders from a company's profits. These profits come from the company's retained earnings, which are the portion of earnings that the company chooses to keep instead of distributing as dividends. Therefore, dividends come at the expense of retained earnings.

Question 19

​Dividends are paid on the

Accepted Answer

Dividends are paid on the distribution date, which is when the company actually distributes dividend payments to the shareholders who are on record as of the date of record.

Question 20

Persons owning stock on the day a dividend is declared receive the dividend.​

Accepted Answer

Persons owning stock on the ex-dividend date, not the declaration date, are entitled to receive the declared dividend.

Quiz 10: The Features of Stock

Dividend reinvestment plans are a convenient means to encourage individuals to save.

If a stock's price is $90 and the stock is split three for one, the price becomes

Stock dividends increase the wealth of stockholders who receive additional shares. l>

A company may pay 1) a regular quarterly cash dividend 2) stock dividends 3) no dividends

Which of the following is equity? 1) investments 2) additional paid‑in capital 3) retained earnings

Dividend reinvestment plans permit stockholders to defer income taxes on dividends.

A reserve split should raise the per share price of a stock but not it total value.

A stock split

Which of the following are true concerning dividend reinvestment plans? 1) taxes are deferred 2) they offer stockholders a convenient means to save 3) the firm may pay the brokerage and other fees associated with the plans

Stock repurchases

The retention of earnings instead of paying dividends

Stock repurchases reduce 1) total equity 2) total assets 3) corporate taxes 4) total liabilities

A stock dividend causes the firm's

A stock dividend

Dividends may be paid in 1) cash 2) stock 3) retained earnings

Dividend reinvestment plans are

Management may prefer not paying dividends to

Dividends come at the expense of

Dividends are paid on the

Persons owning stock on the day a dividend is declared receive the dividend.

Quiz 10: The Features of Stock

Dividend reinvestment plans are a convenient means to encourage individuals to save.​

If a stock's price is $90 and the stock is split three for one, the price becomes

Stock dividends increase the wealth of stockholders who receive additional shares. l> ​

A company may pay 1) a regular quarterly cash dividend 2) stock dividends 3) no dividends​

Which of the following is equity? 1) investments 2) additional paid‑in capital 3) retained earnings

Dividend reinvestment plans permit stockholders to defer income taxes on dividends.​

A reserve split should raise the per share price of a stock but not it total value.​

​A stock split

Which of the following are true concerning dividend reinvestment plans? ​1) taxes are deferred 2) they offer stockholders a convenient means to save 3) the firm may pay the brokerage and other fees associated with the plans

​Stock repurchases

The retention of earnings instead of paying dividends

Stock repurchases reduce​ 1) total equity 2) total assets 3) corporate taxes 4) total liabilities

A stock dividend causes the firm's​

A stock dividend

Dividends may be paid in 1) cash 2) stock 3) retained earnings

Dividend reinvestment plans are​

Management may prefer not paying dividends to​

Dividends come at the expense of

​Dividends are paid on the

Persons owning stock on the day a dividend is declared receive the dividend.​

Dividend reinvestment plans are a convenient means to encourage individuals to save.

Stock dividends increase the wealth of stockholders who receive additional shares. l>

A company may pay 1) a regular quarterly cash dividend 2) stock dividends 3) no dividends

Dividend reinvestment plans permit stockholders to defer income taxes on dividends.

A reserve split should raise the per share price of a stock but not it total value.

A stock split

Which of the following are true concerning dividend reinvestment plans? 1) taxes are deferred 2) they offer stockholders a convenient means to save 3) the firm may pay the brokerage and other fees associated with the plans

Stock repurchases

Stock repurchases reduce 1) total equity 2) total assets 3) corporate taxes 4) total liabilities

A stock dividend causes the firm's

Dividend reinvestment plans are

Management may prefer not paying dividends to

Dividends are paid on the

Persons owning stock on the day a dividend is declared receive the dividend.