11- We are interested in dividend policy because it affects the firms stock price in the short run increasing the dividend payout would increase the price in the long , however increasing the payout would deprive the firm of sources for reinvestment hamper the growth of the funds and depress the stock price. One of the role of the Board of Directors is to tailor an optimal dividends policy to maximize the value of the firm (stock price ) by striking a balance between the short and long term considerations .

TRUE OR FALSE

15- If forecasted sales are overly optimistic, the company could end up with too much plant equipment, and inventory, leading to:

Select one :

a. Write -offs of spoiled inventory which would result in low profits and depressed stock price. if he growth is financied with debt , high interest expenses would compound the firms problems.

b- low costs for depreciation and storage.

c- High turnover ratios .

d. High turnover ratios and low costs for depression and storage.

16- Addition to retained earnings is the proportion of net income that is paid out by the firm as cash dividends, and is calculated as 1 minus the retention ratio.

TRUE OR FALSE