Question 1

A common practice today is to have shares of stock in ________,using the name of the brokerage as owner rather than you.

Accepted Answer

Having shares in "street name" means that the name of the brokerage is used as the owner instead of your own name. This is a common practice because it provides an added level of privacy and protection for the investor's personal information. Bearer name is not a common practice and may imply that the shares are not registered to anyone in particular. Your financial advisor's name may be used for record-keeping purposes but not as the actual owner of the shares. Beneficiary name is used in cases of inheritance or transfer of ownership upon death.

Question 2

The ________ is the date when the board of directors announces the next cash dividend to the public.

Accepted Answer

The declaration date is when the board of directors announces the next cash dividend to the public. The record date is the date when a company reviews its records to determine which shareholders are entitled to receive the dividend. The payment date is when the dividend is actually paid to eligible shareholders. The ex-dividend date is the date on which a stock begins trading without the value of its next dividend payment.

Question 3

Which of the following dividends does NOT actually involve the distribution of money?

Accepted Answer

Stock dividends involve distributing additional shares of stock to existing shareholders, rather than distributing cash.

Question 4

Define the following terms: regular cash dividend,stock dividend,special dividend,and liquidating dividend.An increase in which of these dividends appears to send the most positive signal to the market? Why?

Accepted Answer

The answer of Define the following terms: regular cash dividend,stock...

Question 5

A liquidating dividend is a dividend that a company pays out routinely to shareholders,often quarterly and often the same from quarter to quarter.

Accepted Answer

A liquidating dividend is not paid routinely, but rather when a company is liquidating its assets and distributing the proceeds to its shareholders. These dividends are not part of the company's regular dividend policy.

Question 6

The decision to pay a cash dividend is within the jurisdiction of ________.

Accepted Answer

The decision to pay a cash dividend is ultimately made by the board of directors of the firm. They are responsible for determining the amount and timing of dividend payments, and must act in the best interest of the company and its shareholders. The SEC may have some oversight and regulation of the process, but does not make the final decision on whether or not a dividend will be paid. The firm's labor union and largest shareholders may have input into the decision, but ultimately it is up to the board of directors to make the call.

Question 7

Which of the following is NOT a form of corporate dividend?

Accepted Answer

All three options listed are forms of corporate dividend, therefore D is the best choice as it states that all options given are forms of corporate dividend.

Question 8

Pike's Peak Pure Spring Water Inc.is considered a liquid company because of its generous dividend policy.Prior to the firm's ex-dividend date of June 15th,the stock is selling for a price of $31.25 per share.If you purchase the stock prior to June 15th,you will receive a dividend of $1.60.If you waited until June 16th to buy the stock,and there was no other event to change the price of the stock,what would be the stock's expected price?

Accepted Answer

On the ex-dividend date, the stock's price usually decreases by the amount of the dividend. Therefore, after June 15th, the stock's price is expected to be $31.25 - $1.60 = $29.65.

Question 9

Typically,shares of stock are stored in the vault of the brokerage firm and you,as owner,will not take physical possession.Under these circumstances the brokerage firm is the ________ and you are the ________.

Accepted Answer

The brokerage firm is considered the "owner of record" because it holds the shares in its name, while you, as the investor, are the "beneficiary owner" because you have the beneficial rights to the shares, such as dividends and voting rights, without holding the physical stock certificates.

Question 10

Identify each of the following dates associated with the payment of a dividend by Jefferson State Timber Company: August 15,September 5,September 7,and September 22.

Accepted Answer

The correct sequence for dividend payment process is: Declaration Date (the date the company announces the dividend payment), Ex-Dividend Date (the date by which you must own the stock to receive the dividend, typically two business days before the Record Date), Record Date (the date on which the company looks at its records to determine the shareholders eligible for the dividend), and Payment Date (the date the dividend is actually paid to the shareholders).

Question 11

A special dividend is associated with a period of especially poor company performance.

Accepted Answer

A special dividend is not necessarily associated with poor company performance. It is a one-time payment made by a company to its shareholders in addition to its regular dividend, often funded by cash reserves or the sale of assets. Companies may issue special dividends for various reasons, including excess cash, a windfall gain, a change in tax policy, or to reward shareholders. It is not necessarily an indication of poor performance.

Question 12

If you choose to buy shares of stock and leave the shares with your broker in street name,then the brokerage firm becomes the beneficiary owner and you become the owner of record.

Accepted Answer

When shares are held in street name, the brokerage firm is listed as the owner of record, but the actual investor (you) retains the benefits of ownership such as dividends and voting rights.

Question 13

The final distribution of cash to shareholders after a company has been sold off or discontinued operations is called a/an ________ dividend.

Accepted Answer

A liquidating dividend is the final distribution of cash to shareholders after a company has sold off or discontinued operations. This dividend is meant to distribute the remaining assets of the company to the shareholders.

Question 14

The record date is the date on which the board of directors announces the next quarterly cash dividend.

Accepted Answer

The record date is the date on which shareholders must officially own shares in order to be eligible to receive the dividend. The announcement date is when the board of directors announces the dividend, but it is not the record date.

Question 15

A stock dividend pays shareholders of record with additional shares of stock rather than with cash.

Accepted Answer

A stock dividend results in the issuance of additional shares of stock to existing shareholders, rather than a cash payment.

Question 16

After placing an order to buy or sell shares of stock through your broker,which of the following statements is TRUE regarding the settlement date for the order?

Accepted Answer

The settlement date is two days after the agreed-upon trade. This is known as T+2 settlement. T stands for the day of the trade and the +2 refers to the two business days after the trade date.

Question 17

The decision to pay a cash dividend is within the jurisdiction of the shareholders.

Accepted Answer

The decision to pay a cash dividend is typically made by the company's board of directors, not the shareholders.

Question 18

It is August 14th and John has just purchased 100 shares of Cash Cow Inc.for $1,200 with a settlement date of August 16th.Cash Cow recently declared a dividend of $1.00 per share payable to shareholders of record as of August 15th.How much money did John pay for the right to the recently declared dividend?

Accepted Answer

John was not the shareholder of record on August 15th, so he did not have the right to the dividend payment. The payment went to the previous owner of the stock. Hence, John paid $0.00 for the recently declared dividend.

Question 19

Firms that pay dividends typically pay ________ time(s)per year.

Accepted Answer

Firms that pay dividends typically pay four times per year, as they distribute their earnings quarterly. Thus, the best choice is C: four. The other options are not consistent with common dividend payment practices.

Question 20

What is a cash dividend? Define and describe the process of declaring and paying a cash dividend.In your description,define the following terms: the declaration date,the ex-dividend date,the record date,and the payment date.

Accepted Answer

The answer of What is a cash dividend? Define and...

Quiz 17: Dividends, Dividend Policy, and Stock Splits