Payout Policy

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Fundamentals of Corporate Finance, 2e (Berk)
Chapter 17 Payout Policy

17.1 Cash Distribution to Shareholders

2) The way a firm chooses between alternate uses of free cash flow is referred to as A) retention ratio.
B) payout policy.
C) call policy.
D) debt policy.
Answer: B

3) The date on which the board of directors of a company authorizes the dividend is called the ________ date. A) declaration
B) record
C) ex-dividend
D) distribution
Answer: A

4) The firm will pay the dividend to all shareholders of record on a specific date, set by the board, called the ________ date. A) declaration
B) record
C) ex-dividend
D) distribution
Answer: B

5) The date two business days prior to the date on which all shareholders of record receive a payment is called the ________ date. A) declaration
B) record
C) ex-dividend
D) distribution
Answer: C

6) The date on which a firm pays out dividends is called the ________ date. A) declaration
B) record
C) ex-dividend
D) distribution
Answer: D

7) A one-time payment to shareholders that is much larger than a regular dividend is often referred to as a ________ dividend. A) taxable
B) divesting
C) special
D) ex-day
Answer: C

8) Dividend payments that are the result of liquidation of assets are known as ________ and are taxed as capital gains. A) return of capital
B) rolling dividends
C) alternate payments
D) private earnings
Answer: A

9) An alternate way to pay investors is when the firm uses cash to buy shares of its own outstanding stock, also known as A) dividend investment.
B) retained earnings.
C) initial public offering.
D) share repurchases.
Answer: D

10) A firm may announce its intention to buy its own shares in the open market like any other investor, also known as a(n) A) open market purchase.
B) tender offer.
C) targeted repurchase.
D) greenmail.
Answer: A

11) When a firm offers to buy its shares at a pre specified price during a short time period it is also known as a(n) A) open market purchase.
B) tender offer.
C) targeted repurchase.
D) greenmail.
Answer: B

12) When a firm purchases shares directly from a major shareholder it is also known as a(n) A) open market purchase.
B) tender offer.
C) targeted repurchase.
D) greenmail.
Answer: C

13) A firm may decide to eliminate the threat of a takeover by a major shareholder by purchasing shares from him at a premium also known as a(n) A) open market purchase.
B) tender offer.
C) targeted repurchase.
D) greenmail.
Answer: D

15) The firm will pay the dividend to all shareholders who are registered owners on a specific date, set by the board, called the A) declaration date.
B) record date.
C) distribution date.
D) ex-dividend date.
Answer: B

16) Anyone who purchases the stock on or after the ________ date will not receive the dividend. A) distribution
B) record
C) ex-dividend
D) declaration
Answer: C

17) The firm mails dividend checks to the registered shareholders on the A) ex-dividend date.
B) declaration date.
C) distribution date.
D) record date.
Answer: C

18) Which of the following statements is FALSE?
A) From an accounting perspective, dividends generally reduce the firm's current (or accumulated) retained earnings. B) The way a firm chooses between paying dividends and retaining earnings is referred to as its payout policy. C) Most companies that pay dividends pay them semiannually.

D) Occasionally, a firm may pay a one-time, special dividend that is usually much larger than a regular dividend. Answer: C

19) A firm can repurchase shares through a(n) ________ in which it offers to buy shares at a prespecified price during a short time period–generally within 20 days. A) tender offer
B) open market share repurchase
C) targeted repurchase
D) Dutch auction share repurchase
Answer: A

20) Another to method to repurchase shares is the ________, in which the firm lists different prices at which it is prepared to...
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