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Multiple Choice
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1

The Board of Directors may do which of the following with net income?
A)put it in the cash account
B)retain it
C)pay it out as dividends
D)B & C above
2

One desire of stockholders regarding dividend policy is:
A)stable dividends
B)frequent dividends
C)low dividends
D)high dividends
3

A stock dividend:
A)increases the value of stockholder's equity.
B)decreases the value of stockholder's equity
C)does not change the value of stockholder's equity.
D)none of the above
4

The purpose of a stock split is usually to:
A)increase the investor's wealth
B)bring down the stock price into a lower trading range.
C)reduce of threat of takeover
D)decrease the number of shares outstanding
5

As a result of the Jobs and Growth Tax Relief Act of 2003, dividends and capital gains are taxed at a maximum rate of:
A)38.6%
B)20%
C)15%
D)none of the above
6

Which of the following balance sheet accounts will be affected by a stock dividend but not by a stock split?
A)dividends in arrears
B)cash
C)common stock
D)retained earnings
7

A firm may repurchase its own stock because:
A)it provides positive information about the firm.
B)the firm has inadequate capital budgeting alternatives
C)it will increase shareholder's wealth
D)all of the above
8

A stock split:
A)does not change the amount in the common stock account
B)is treated by accountants just like a stock dividend
C)reduces retained earnings
D)none of the above
9

The ex-dividend date is the date:
A)on which recipients of the dividend are determined
B)the dividend is declared
C)which no longer includes dividend payments for stock bought on that date.
D)none of the above
10

Individuals in a high tax bracket typically prefer for a firm to:
A)issue dividends
B)retain earnings
C)hold cash
D)none of the above





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