Financial Accounting
3rd Edition
ISBN: 9780078025549
Author: J. David Spiceland, Wayne M Thomas, Don Herrmann
Publisher: McGraw-Hill Education
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Chapter 12, Problem 4RQ
To determine
To Identify: The Company which is more likely to be an older and more established company, and the reason behind it.
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6. Fully explain Retained Earnings, Share Capital and Dividends. What arethey? Why are they important to a corporation and an investor? What occurswhen the company experiences negative net income (an accounting loss)?What happens if these losses continue over time?
Each of the following factors may cause a corporation to lower its dividend payout ratio EXCEPT
A.
the corporation's current and quick ratios are higher than industry average.
B.
the corporation's earnings predictability is high.
C.
current common shareholders are unable to participate in new equity offerings.
D.
the corporation's retained earnings balance is high.
Which of the following statements are false? (you may choose more than one statement)
A The issue of ordinary shares will not dilute ownership of the company
B A rights issue will not dilute ownership of the company
C A bonus issue is a means of raising finance for the business
D A company can decide on the level of dividends they pay out to ordinary
shareholders each year
Chapter 12 Solutions
Financial Accounting
Ch. 12 - Prob. 1RQCh. 12 - Prob. 2RQCh. 12 - Prob. 3RQCh. 12 - Prob. 4RQCh. 12 - 5.In performing horizontal analysis, why is it...Ch. 12 - Prob. 6RQCh. 12 - Prob. 7RQCh. 12 - Prob. 8RQCh. 12 - Prob. 9RQCh. 12 - Prob. 10RQ
Ch. 12 - Prob. 11RQCh. 12 - Prob. 12RQCh. 12 - Prob. 13RQCh. 12 - Prob. 14RQCh. 12 - Prob. 15RQCh. 12 - Prob. 16RQCh. 12 - Prob. 17RQCh. 12 - Prob. 18RQCh. 12 - Prob. 19RQCh. 12 - Prob. 20RQCh. 12 - Prob. 12.1BECh. 12 - Prob. 12.2BECh. 12 - Prob. 12.3BECh. 12 - Prob. 12.4BECh. 12 - Prob. 12.5BECh. 12 - Universal Sports Supply began the year with an...Ch. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.10BECh. 12 - Prob. 12.11BECh. 12 - Prob. 12.12BECh. 12 - Prob. 12.13BECh. 12 - Classify each of the following accounting...Ch. 12 - Classify each of the following accepted accounting...Ch. 12 - Prob. 12.1ECh. 12 - Prob. 12.2ECh. 12 - Prob. 12.3ECh. 12 - Prob. 12.4ECh. 12 - Prob. 12.5ECh. 12 - Prob. 12.6ECh. 12 - Prob. 12.7ECh. 12 - Prob. 12.8ECh. 12 - Prob. 12.9ECh. 12 - The income statement for Stretch-Tape Corporation...Ch. 12 - Prob. 12.11ECh. 12 - Prob. 12.12ECh. 12 - Prob. 12.13ECh. 12 - Prob. 12.14ECh. 12 - Distinguish between conservative and aggressive...Ch. 12 - Prob. 12.1APCh. 12 - Prob. 12.2APCh. 12 - Prob. 12.3APCh. 12 - Prob. 12.4APCh. 12 - Prob. 12.5APCh. 12 - Prob. 12.6APCh. 12 - Prob. 12.1BPCh. 12 - Prob. 12.2BPCh. 12 - Prob. 12.3BPCh. 12 - Prob. 12.4BPCh. 12 - Prob. 12.5BPCh. 12 - Prob. 12.6BPCh. 12 - Prob. 12.1APCPCh. 12 - Prob. 12.2APFACh. 12 - Prob. 12.3APFACh. 12 - Prob. 12.4APCACh. 12 - Prob. 12.5APECh. 12 - Prob. 12.7APWCCh. 12 - Prob. 12.8APEM
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- d. (1) What are the two primary ways companies raise common equity? (2) Why is there a cost associated with reinvested earnings? (3) Jana doesnt plan to issue new shares of common stock. Using the CAPM approach, what is Janas estimated cost of equity?arrow_forwardA1)arrow_forwardWhat does it mean when a company has zero net income but its stock price has increased? How do you recognize the change under the equity method?arrow_forward
- 17. Which of the following is not a reason why companies are not always entirely clear on their dividend policy? A. For fear of giving away sensitive information. B . In order to maintain a managerial advantage over shareholders. C. Because they do not know how much is available for dividends. D. Companies have different abilities to communicatearrow_forwardWhich of the following is a correct statement concerning earnings per share? Select one: a. Earnings per share can never be a negative number. b. Earnings per share must be reported for all corporations. c. If a company has discontinued operations, at least two EPS amounts must be reported. d. Reported earnings per share is the result of dividing weighted-average shares by net income. e. None of the above.arrow_forwardWhich factors influence the dividend policy of a company? Also please locate and briefly post the dividend policy of a publicly held company of your choosing and discuss the positive and negative aspects of the policy. What assumptions about the financial health of the business can you derive from the dividend policy? Would the dividend policy make you more or less likely to invest in the company?arrow_forward
- .......theory would deduce that corporate growth causes an increase in shareholder remittance . Select one : a . Agency Theory b . Normative Accounting c . None of the other Points d . Positive Accountingarrow_forwardDividend policy determines the ratio between the earnings distributed to shareholders and the earnings retained in the company. Should the cash be reinvested in business operations or should it be paid out to investors in equity? The decision might seem simple, but it provokes a surprising number of controversies. a) In relation to the above, discuss the different dividend policy theories. b) Explain the Gordon's Dividend Valuation Model.arrow_forwardA company that operates within a country whose legal system and laws relating to dividend policy are strict will tend to? a. Maintain or increase dividend pay-out ratio b. Increase plowback ratio c. Maintain an equal retention and pay-out ratio d. None of the foregoing choices A share split will cause changes in the total balance of which of the following balance sheet account? a. Cash b. Share capital c. Retained Earnings d. None of the choicesarrow_forward
- To what extent do you feel the company’s dividend policies support or hinder their strategies? For example, if the company is attempting to grow, are they retaining and reinvesting their earnings rather than distributing them to investors through dividends? Be sure to substantiate your claims.arrow_forwardWhich of the following statements is true? a. High liquidity means a company is short on cash and may be unable to pay its debts.b. When a company decides to go public through an IPO, it is typically targeting to sell its shares to only a handful of shareholders. c. If the company has a higher than expected extremely high profit this year, equity holders will benefit more than debt holders as debtholders are the residual claimers for the cash flows of the company.d. In the extreme case, the debt holders take legal ownership of the firm's assets through a process called bankruptcy.e. Equity holders expect to receive dividends and the firm is always legally obligated to pay them.arrow_forwardDividend policy and company value: You have just encountered two identical companies with identical investment opportunities, as well as the ability to fund these opportunities. You have found that one of the companies has just announced an introductory dividend policy, whereas the other has continued with a no-dividend policy. Which of the two companies is worth more? Explainarrow_forward
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