QUESTION 13The most common practice is a variation of the:O a. residual theory of dividendsO b. constant dividend payout ratioOc. stable dividend policyO d. low dividend plus extra policy

A dividend policy is the policy an organisation (company) uses to structure its dividend payout to…

Answered: QUESTION 13 The most common practice is…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Define each of the following terms:a. Target payout ratio; optimal dividend policyb. Dividend irrelevance theory; bird-in-the-hand fallacyc. Information content (signaling) hypothesis; clienteles; clientele effectd. Catering theory; residual dividend modele. Low-regular-dividend-plus-extrasf. Declaration date; holder-of-record date; ex-dividend date; payment dateg. Dividend reinvestment plan (DRIP)h. Stock split; stock dividendi. Stock repurchase
Define each of the following terms:a. Optimal distribution policyb. Dividend irrelevance theory; bird-in-the-hand theory; tax effect theoryc. Signaling hypothesis; clientele effectd. Residual distribution model; extra dividende. Declaration date; holder-of-record date; ex-dividend date; payment datef. Dividend reinvestment plan (DRIP)g. Stock split; stock dividend; stock repurchase
An increase in which of the following will increase the return on equity, all else constant?I. salesII. net incomeIII. depreciationIV. total equity
Which are valid methods for finding the cost of equity? Check all that apply: 1. The dividend discount model approach 2. The perpetuity approach 3. The YTM approach 4. The CAPM or SML approach
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Which of the following statements is correct in relation to a stock investment?I. The capital gains yield can be positive, negative, or zero.II. The dividend yield can be positive, negative, or zero.III. The return can be positive, negative, or zero.IV. Neither the dividend yield nor the return can be negative. A. I onlyB. I and II onlyC. I and III onlyD. I and IV onlyE. IV only
Question No. 2: Write short notes on the following: A. Market Segmentation Theory. B. Liquidity Premium Theory.
Explain what a residual policy implies (assuming that all distributions are in the form of dividends), illustrating your answer with a table showing how different investment opportunities could lead to different dividend payout ratios.
Most prevalent types of dividend policy are – i. Regular dividend policy ii. Stable Dividend Policy ii. Irregular Dividend Policy iv. No Dividend Policy Briefly explain each of the above policies. Link Modigliani and Miller dividend theory and Bird in Hand theory of dividend to any of the above policies to which those theories can be linked most appropriately.
Why is the dividend calculation fomula different both times.
Questions: 1. Price-earnings ratio 2. Dividend payout ratio 3. Dividend yield ratio

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QUESTION 13 The most common practice is a variation of the: O a. residual theory of dividends O b.constant dividend payout ratio O c. stable dividend policy O d. low dividend plus extra policy