One reason why small business concerns have very low dividend payout ratios is that the firm ____. a. needs funds for taxes b. needs the funds to finance growth c. is usually low on cash d. prefers stock offerings

One reason why small business concerns have very low dividend payout ratios is that the firm ____. a. needs funds for taxes b. needs the funds to finance growth c. is usually low on cash d. prefers stock offerings

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter13: Capital Structure Concepts

Section: Chapter Questions

Problem 2P

See similar textbooks

QUESTION 26

One reason why small business concerns have very low dividend payout ratios is that the firm ____.

a.
needs funds for taxes

b.
needs the funds to finance growth

c.
is usually low on cash

d.
prefers stock offerings

Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

which one is correct please confirm? QUESTION 2 In the theoretical world of Miller and Modigliani, ____. a. a firm should pay out 100% of earnings as dividends to maximize shareholder wealth b. dividends are important only for their informational content c. dividends reduce investors’ uncertainty d. the marginal tax rates facing investors are the most important single determinant of dividend policy
Except for one of the following the constant dividend growth model is useful to corporate managers because: a. the required rate of return of shareholders is related to the company's level of risk as perceived by investors. b. the dividend stream is influenced by earnings and profitability as well as the dividend policy of management c. the growth rate is related to the efficiency of the company in generating returns on equity d. inflation calculations are incorporated in the model
which one is correct please confirm? QUESTION 37 Which of the following statements is true concerning companies that do not pay dividends? a. The cost of equity capital can be estimated using the Capital Asset Pricing Model. b. The cost of equity capital is equal to the growth short-term rate of earnings per share. c. The dividend capitalization model can be used to determine an accurate cost of equity capital. d. None of these are correct
Which of the following statements is FALSE? Question content area bottom Part 1 A. Growth rate of the firm is higher, it is more optimal to have a higher level of debt relative to equity in the firm capital structure. B. Growth will affect the optimal leverage ratio even if the firm has positive earnings. C. When examining tax, the optimal debt level is proportional to its current earnings. D. The more unsure we are of EBIT the more chance that interest will exceed EBIT, if the interest expense is high
Which of the following statement is NOT a function of the stock market in a market economy? A. to offer a safe and predictable rate of return for investorsB. allows households to invest savings into corporations in order to make profits through capital gains and earn money through dividendsC. allows public corporations to raise capital for business expansion, to finance new products, and to acquire other businesses.D. All of the statements are function of stock market in the company
To maximise the wealth of shareholders, a finance manager should _________ Question 20 options: 1) increase the current ratio of the firm 2) decrease the debt ratio of the firm 3) increase the cost of goods sold of the firm 4) increase the share price of the firm
For each of the companies described here, would you expect it to have a low, medium, or high dividend-payout ratio? 1. A company with a large proportion of inside ownership, all of whom are high-income individuals? A. Low dividend-payout ratio B. Medium or high dividend-payout ratio. 2. A growth company with an abundance of good investment opportunities? A. Low dividend-payout ratio B. Medium or high dividend-payout ratio. 3. A company that has high liquidity and much unused borrowing capacity and is experiencing ordinary growth? A. Low dividend-payout ratio B. Medium or high dividend-payout ratio. 4. A company with volatile earnings and high business risk? A. Low dividend-payout ratio B. Medium or high dividend-payout ratio.
Which of the following situation in which the quality of the company’s pay-out to shareholders may decline a. Decrease in cash position b. Increase in positive NPV investment opportunities c. Increase in capital gains tax d. Decrease in marginal tax rate on dividends Which of the following concepts tells us that dividends are to be paid only when the capital budget has been already supplied? a. Gordon Growth model b. Dividend irrelevance theory c. Retain Earnings break-point principle d. Residual Dividend Model
TRUE OR FALSE Answer as either true or false and provide a reason for why. When a company pays dividends, its share price falls. Modigliani and Miller proposition II (without taxes) implies that the weighed average cost of capital increases as more debt is issued, since debt make the firm more risky The empirical findings that more profitable firms have lower debt ratios is consistent with the trade-off theory regarding capital structure. The WACC formula assumes that the amount of debt issued remains constant. Other things being equal, buying a put option is the same as selling a call option
1. The primary goal for a firm's financial managers is to:A. Maximize the firm's reported net income per share of common stock.B. Minimize the price of the company's outstanding bonds.C. Maximize dividends paid to stockholders.D. Maximize shareholder wealth.E. Smooth the firm's earnings so they are positive and always growing.
1. How is it possible for a firm to be profitable and still go bankrupt? Select one: a. The firm has positive net income but has failed to generate cash from operations. b. Earnings have increased more rapidly than sales. c. Sales have not improved even though credit policies have been eased. d. Net income has been adjusted for inflation. 2. Which ratio or ratios measure the overall efficiency of the firm in managing its investment in assets and in generating return to shareholders? Select one: a. Gross profit margin and net profit margin. b. Return on investment and return on equity. c. Total asset turnover and operating profit margin. d. Return on investment. 3. What is the first step in an analysis of financial statements? Select one: a. Specify the objectives of the analysis. b. Do a common size analysis. c. Check references containing financial information. d. Check the auditor’s report. 4. What information does the auditor’s report contain? Select one: a. The results of…