12 Jan 1 Paying a stock dividend ________ the retained ea
1 Paying a stock dividend ________ the retained earnings account1 1 increases2 2 has no effect on3 3 reorganizes4 4 decreases2 Firms are usually prohibited by state law from distributing1 1 retained earnings as dividends2 2 dividends in a year the firm has a net loss3 3 assets as dividends4 4 paid-in capital as dividends3 Tangshan Mining has common stock at par of $200,000, paid in capital in excess of par of $400,000, and retained earnings of $280,000 In states where the firm’s legal capital is defined as the total of par value and paid-in-capital of common stock, the firm could pay out ________ in cash dividends without impairing its capital 1 1 $480,0002 2 $600,0003 3 $400,0004 4 $280,0004 A firm has current after-tax earnings of $1,000,000 and has declared a cash dividend of $400,000 The firm’s dividend payout ratio is 1 1 40 percent2 2 25 percent3 3 40 percent4 4 20 percent5 A dividend reinvestment plan enables stockholders to 1 1 reinvest all dividends in the firm with no accompanying increase in equity2 2 acquire shares at little or no transaction costs3 3 reinvest the dividends in money market instruments which are risk free4 4 acquire additional dividends through redemption of stock6An excess earnings accumulation tax is levied when 1 1 firms do not pay dividends in order to delay the owner’s tax liability2 2 firms do not pay dividends to reinvest in the firm3 3 shareholders receive dividends which exceed the firm’s earnings4 4 earnings exceed dividends7 Which type of dividend payment policy has the disadvantage that if the firm’s earnings drop or if a loss occurs in a given period, dividends may be low or nonexistent? 1 1 Low-regular-and-extra dividend policy2 2 Regular dividend policy3 3 Constant-payout-ratio policy4 4 none of these8 A dividend reinvestment plan ________ on the security 1 1 decreases the return2 2 has no effect on the return3 3 has an undetermined effect4 4 increases the return9 The capital impairment restrictions are established to 1 1 protect the shareholder2 2 constrain the firm to paying dividends which do not require additional borrowing3 3 provide a sufficient base to protect creditors’ claims4 4 reduce dividends equal to or below the current earnings level10 At a firm’s quarterly dividend meeting held April 9, the directors declared a $050 per share cash dividend for the holders of record on Monday, May 1 The firm’s stock will sell ex-dividends on 1 1 May 12 2 April 253 3 April 9 4 4 April 27
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