10 Questions
What is the implication of the assumption that there is no change in the business risk position and the rate of return?
The rate of return on investment remains constant.
What is the significance of stability of dividends?
It is a sign of good health of the firm and may take various forms.
What is the effect of stock dividend or bonus shares on the total net worth of the firm?
It has no effect on the total net worth of the firm.
Which of the following is a characteristic of the assumptions in the dividend policy?
The absence of taxes and transaction costs.
What is the purpose of stock dividend or bonus shares?
To increase the number of outstanding shares of the firm.
What is the relationship between the reserves and surplus, and the share capital, after the stock dividend or bonus shares?
The reserves and surplus are transferred to the share capital.
What is the implication of the assumption that the dividends and profits of the firm have no risk?
This assumption was dropped at a later stage.
What is the significance of constant dividend per share?
It is a form of stability of dividends.
What is the effect of stock dividend or bonus shares on the firm's capital structure?
It has no effect on the firm's capital structure.
What is the assumption about the size of the investors in the dividend policy?
No single investor is large enough to influence the share value.
This quiz covers the basics of dividend policy decisions, including the types of dividends, how they are paid to shareholders, and how they affect shareholder returns. Learn about the factors that influence dividend decisions and how they impact a firm's earnings. Test your knowledge of dividend policy and its components.
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