1 Paying a stock dividend ________ the retained earnings account 1 1 increases 2 2 has no effect on

 
   

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1 Paying a stock dividend ________ the retained earnings
account

1 1 increases

2 2 has no effect on

3 3 reorganizes

4 4 decreases

2 Firms are usually prohibited by state law from
distributing

1 1 retained earnings as dividends

2 2 dividends in a year the firm has a net loss

3 3 assets as dividends

4 4 paid-in capital as dividends

3 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 $480,000

2 2 $600,000

3 3 $400,000

4 4 $280,000

4 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 percent

2 2 25 percent

3 3 40 percent

4 4 20 percent

5 A dividend reinvestment plan enables stockholders to

1 1 reinvest all dividends in the firm with no
accompanying increase in equity

2 2 acquire shares at little or no transaction costs

3 3 reinvest the dividends in money market instruments
which are risk free

4 4 acquire additional dividends through redemption of
stock

6An excess earnings accumulation tax is levied when

1 1 firms do not pay dividends in order to delay the
owner’s tax liability

2 2 firms do not pay dividends to reinvest in the firm

3 3 shareholders receive dividends which exceed the firm’s
earnings

4 4 earnings exceed dividends

7 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 policy

2 2 Regular dividend policy

3 3 Constant-payout-ratio policy

4 4 none of these

8 A dividend reinvestment plan ________ on the security

1 1 decreases the return

2 2 has no effect on the return

3 3 has an undetermined effect

4 4 increases the return

9 The capital impairment restrictions are established to

1 1 protect the shareholder

2 2 constrain the firm to paying dividends which do not
require additional borrowing

3 3 provide a sufficient base to protect creditors’
claims

4 4 reduce dividends equal to or below the current
earnings level

10 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 1

2 2 April 25

3 3 April 9

4 4 April 27