Which one of the following statements is correct? A Modigliani and Miller argued that dividend decisions are more important than capital structure decisions. Dividend policy is usually set by shareholders during the Annual General Meeting of a company. A share repurchase is an alternative to a dividend as a means for redistributing cash to the equity market. Shareholders typically view dividend increases as a signal of financial distress.

Which one of the following statements is correct? A Modigliani and Miller argued that dividend decisions are more important than capital structure decisions. Dividend policy is usually set by shareholders during the Annual General Meeting of a company. A share repurchase is an alternative to a dividend as a means for redistributing cash to the equity market. Shareholders typically view dividend increases as a signal of financial distress.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter14: Corporation Accounting

Section: Chapter Questions

Problem 14MC: Which of the following is true of a stock dividend? A. It is a liability. B. The decision to issue a...

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Which of the following is true of a stock dividend? A. It is a liability. B. The decision to issue a stock dividend resides with shareholders. C. It does not affect total equity but transfers amounts between equity components. D. It creates a cash reserve for shareholders.
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?
As a bakery business continues to grow, cash flow has become more of a concern. The board of directors would like to maintain the market share price, so a discussion ensues about issuing a stock dividend versus a cash dividend. As a newly appointed board member you listen to the conversation and need to cast your vote. Which do you vote for: stock dividend or cash dividend?
The following statements are true regarding dividends. Which of the following is incorrect? a) Dividends are distributions of earnings or capital to shareholders in proportion to their shareholdings. b) If an entity has a deficit, paying dividends is still considered legal. c) Liquidating dividends are distributions of capital to shareholders in proportion to their shareholdings. d) The common forms of dividends out of earnings are cash dividend, property dividend and share dividend.
Which 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.
To what extent does 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 claims.
What is the distinction between that of Paid-in-Capital and Retained Earnings, in both differences and similarities? What characteristic of a corporation limits a stockholder's loss to the amount of his or her investment in the stock of the corporation? When would a company be able to declare a cash dividend? How many main categories of paid-in capital are there? And what are? What is the definition of the term par value of stock?
It has become common for companies to offer their shareholders a choice between a cash dividend and an equivalent scrip dividend. Critically discuss the advantages of scrip dividends from the point of view of the company and the shareholders, ensuring the response draws upon relevant academic research within this highly topical area of financial management.
Which of the following theories is supported by the argument that shareholders can transform a company dividend policy into a different policy by means of investors buying and selling on their own account? a. dividend irrelevance theory b. "bird-in-the-hand" theory C. residual distribution model d. tax preference theory
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.
A company’s dividend policy refers to the manner in which a firm distributes its earnings to shareholders. Firms can pay out cash in one of two ways: a dividend or a share repurchase. Before 1983, stock repurchases were fairly rare, but today they are common. When a firm decides to pay a dividend, it usually follows the following process. Several critical dates play a role in the dividend payment procedure. In the following table, identify the critical dividend dates. Check boxes that apply for each: Declaration Date Ex-Dividend Date Payment Date Holder-of-Record Date Dividend checks are sent to shareholders. Shares purchased on or after this date do not entitle investors to the stock’s dividend. All shareholders as of this date will be mailed a dividend check. The firm announces its intention to pay a dividend.
I have been told by a colleague who is studying accounting that our current accounting policy in relation to dividend may not be correct or in accordance with accounting standards. My colleague stated that many public companies have dividend policies, which have been communicated to shareholders as to the amount of the fully franked distribution, which will be paid to shareholders. It may be argued that such a policy provides the company with a constructive liability to pay the dividend. Currently, the dividend is not treated as constructive liability in Cairns Ltd. Could you please advise whether the constructive liability should arise?