Financial Management Quiz Paper

FIN 534 (Strayer) Financial Management Week 9 Quiz 8

Question 1 2 out of 2 points

Which of the following statements about dividend policies is correct? Answer Selected Answer:

The clientele effect suggests that companies should follow a stable dividend policy.

Correct Answer:

The clientele effect suggests that companies should follow a stable dividend policy.

Question 2 2 out of 2 points

If a firm adheres strictly to the residual dividend policy, the issuance of new common stock would suggest that Answer Selected Answer:

no dividends were paid during the year.

Correct Answer:

no dividends were paid during the year.

Question 3 2 out of 2 points

Which of the following statements is correct? Answer Selected
Answer Selected Answer:

Minimize the weighted average cost of capital (WACC).

Correct Answer:

Minimize the weighted average cost of capital (WACC).

Question 23 2 out of 2 points

Business risk is affected by a firm's operations. Which of the following is NOT associated with (or does not contribute to) business risk? Answer Selected Answer:

The extent to which interest rates on the firm's debt fluctuate.

Correct Answer:

The extent to which interest rates on the firm's debt fluctuate.

Question 24 0 out of 2 points

If debt financing is used, which of the following is CORRECT? Answer Selected Answer:

The percentage change in net income relative to the percentage change in net operating income will depend on the interest rate charged on debt.

Correct Answer:

The percentage change in net income will be greater than the percentage change in net operating income.

Question 25 2 out of 2 points

Which of the following events is likely to encourage a company to raise its target debt ratio, other things held constant? Answer

Selected Answer:

An increase in the corporate tax rate.

Correct Answer:

An increase in the corporate tax
As a firm increases the operating leverage used to produce a given quantity of output, this will Answer Selected

Answer: Correct Answer:

normally lead to an increase in its fixed assets turnover ratio.

normally lead to a reduction in its fixed assets turnover ratio.

Question 28 2 out of 2 points

Which of the following statements is CORRECT? Answer Selected Answer:

The capital structure that minimizes the WACC also maximizes the price per share of common stock.

Correct Answer:

The capital structure that minimizes the WACC also maximizes the price per share of common stock.

Question 29 2 out of 2 points

Which of the following statements is CORRECT? Answer Selected Answer:

If corporate tax rates were decreased while other things were held constant, and if the Modigliani-Miller tax-adjusted tradeoff theory of capital structure were correct, this would tend to cause corporations to decrease their use of debt.

Correct Answer:

If corporate tax rates were decreased while other things were held constant, and if the Modigliani-Miller tax-adjusted tradeoff theory of capital structure were correct, this would tend to cause corporations to decrease their use of