The Modigliani-Miller theory suggests that it doesn't matter to a shareholder whether a company issues dividends. Why might that theory not be applicable to the US stock market as it currently exists?

Question 1 options:

There are transaction costs associated with trading stock.

Financial leverage does affect a company's cost of capital.

There is information asymmetry between the company's managers and its investors.

All of these answers.

Question 2 (1 point)

Which of the following is an accurate description of one of the dates related to issuing dividends.

Question 2 options:

The in-dividend date is the last day when the stock is cum dividend.

The declaration date is the day the board of directors announces it will pay a dividend.

The ex-dividend date refers to when the shareholders must be registered on record.

All of these answers.

Question 3 (1 point)

Under the Modigliani-Miller theorem in finance, the value of a company depends on:

Question 3 options:

how managers work together.

the capital structure of the company.

stock returns and dividends.

the competitive situation of the company and the projects that the company undertakes and plans.

Question 4 (1 point)

Which of the following is a method of payment a corporation can use to pay a dividend?

Question 4 options:

Securities of other companies.

Stock

All of these answers.

Cash

Question 5 (1 point)

A company wants to implement a capital growth policy. In the current year it had $10 million in net income. How much income should it distribute in dividends?

Question 5 options:

$20 million

$10 million

$8 million

$1 million

Question 6 (1 point)

Which of the following is a drawback of share repurchases for shareholders?

Question 6 options:

All of these answers.

Shareholders can have a hard time gauging how a repurchase will affect the value of their holdings.

Insiders have an advantage of knowing when to sell, which puts other shareholders at a disadvantage.

Share repurchases can be used to manipulate financial metrics, which can mislead investors.

Question 7 (1 point)

Which of the following accurately describes how a stock dividend differs from a stock split?

Question 7 options:

A stock dividend increases the shareholder's percentage ownership in the company; a split does not.

A stock dividend causes the stock's price to fall; a stock split does not.

All of these answers.

A stock dividend is paid using already issued shares; a split requires new shares to be issued.

Question 8 (1 point)

Which of the following changes after a stock splits?

Question 8 options:

The stock's per share price.

The company's total market value.

The stockholder's ownership percentage in the company.

All of these answers.

Question 9 (1 point)

Which of the following is a shareholder benefit associated with a dividend reinvestment program (DRIP)?

Question 9 options:

All of these answers.

DRIPs help to stabilize the stock price.

DRIPs allow investors take advantage of dollar-cost averaging.

DRIPs allow the investors to reinvest their dividend income in the company quickly.

Question 10 (1 point)

Complete the following statement so that it is always true: If a company has significant working capital, _____.

Question 10 options:

All of these answers.

it is guaranteed to have enough cash to pay all of its expenses.

it will probably be able to obtain credit at a lower interest rate.

the company is growing at the highest rate possible.

Question 11 (1 point)

Which of the following factors need to be considered evaluating a company's working capital strategy?

Question 11 options:

The number of days the company can wait before it must pay its debts.

The number of days it takes a business to obtain payment from its customers for its completed sales.

The level of inventory necessary to ensure that a company can meet its customers demands.

All of these answers.

Question 12 (1 point)

Which of the following explains why working capital may not be a pure measure of short-term assets and liabilities?

Question 12 options:

Many businesses are complex, making it difficult to determine the length of the operating cycle.

All of these answers.

The distinction between "current" and "non-current" is arbitrary.

Cash flows available for paying current liabilities may be closely related to long-term assets.

Question 13 (1 point)

A company has $350,000 in accounts receivable, $100,000 in current inventory, and $125,000 in accounts payable. What is its working capital?

Question 13 options:

$325,000

$225,000

$375,000

$450,000

Question 14 (1 point)

Which of the following correctly defines a factor that influences a company's working capital financing decisions?

Question 14 options:

All of these answers.

Credit policy is how a company uses credit to make purchases and whether it allows sales on credit.

A company's return on capital is income divided by the capital used to earn that revenue.

A CCC is the number of days from the purchase of materials until the customer pays for the product.

Question 15 (1 point)

Which of the following is an acceptable strategy for managing a company's disbursements?

Question 15 options:

A company should always purchase products it needs to avoid long-term rental expenses.

All of these answers.

A company should distribute payroll after the point when banks will clear checks for that week.

A company should be overinsured to ensure that it has adequate coverage.

Question 16 (1 point)

Which of the following should a company ALWAYS do with regards to its collection policy?

Question 16 options:

Demand upfront payment when the good or service is delivered.

Set up lock box banking for its customers' convenience.

Tailor its collection policy based on each customer's needs and importance.

Require a deposit from all customers for large purchases.

Question 17 (1 point)

Which of the following is a reason a company would hold marketable securities?

Question 17 options:

To ensure that the company can meet known financial requirements, such as maturing bond issues.

All of these answers.

To obtain a return instead of letting the funds remain idle.

To serve as a substitute for cash balances.

Question 18 (1 point)

A customer has 45 days from the date of invoice to pay a bill in full, but if he pays within 15 days of the invoice, he gets a 10% discount. Which of the following describes these terms of trade?

Question 18 options:

15/10, net 45.

15/45, net 10.

10/15, net 45.

10/45, net 15.

Question 19 (1 point)

Which of the following correctly defines one of the "Five C's of Credit?"

Question 19 options:

Capacity: Does the borrower have sufficient assets to secure the loan?

Capital: Does the borrower have enough cash flow to make its payments?

All of these answers.

Character: Is the borrower trustworthy with a history of meeting its debt obligations?

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