Dividend Decisions : Theories and policies
- Walter’s Model suggests for 100% DP Ratio when:
(a) ke = r
(b) ke < r
(c) ke > r
(d) ke = 0 - If a firm has ke < r, the Walter’s Model suggests for:
(a) 0% Payout
(b) 100% Payout
(c) 50% Payout
(d) 25% Payout - Walter’s Model suggests that a firm can always increase the value of the share by:
(a) Increasing Dividend
(b) Decreasing Dividend
(c) Constant Dividend
(d) None of the above - ‘Bird in hand’ argument is given by:
(a) Walter’s Model
(b) Gordon’s Model
(c) MM Model
(d) Residuals Theory - Residuals Theory argues that dividend is a :
(a) Relevant Decision
(b) Active Decision
(c) Passive Decision
(d) Irrelevant Decision - Dividend irrelevance argument of MM model is based on:
(a) Issue of Debentures
(b) Issue of Bonus Share
(c) Arbitrage
(d) Hedging - Which of the following is not true for MM Model?
(a) Share Price goes up if dividend is paid
(b) Share price goes down if dividend is not paid
(c) Market value is unaffected by Dividend policy
(d) All of the above - Which of the following stresses on investor’s preference for current dividend than higher future capital gains?
(a) Walter’s Model
(b) Residuals Theory
(c) Gordon’s Model
(d) MM Model - MM Model of dividend irrelevance uses arbitrage between:
(a) Dividend and Bonus
(b) Dividend and Capital Issue
(c) Profit and Investment
(d) None of the above - If Ke = r, then under Walter’s Model, which of the following is irrelevant?
(a) Earnings per share
(b) Dividend per share
(c) DP Ratio
(d) None of the above - MM Model argues that dividend is irrelevant as
(a) The value of the firm depends upon earning power
(b) The investors buy shares for capital gain
(c) Dividend is payable after deciding the retained earnings
(d) Dividend is a small amount - Which of the following represents passive dividend policy?
(a) That dividend is paid as a % of EPS
(b) That dividend is paid as a constant amount
(c) That dividend is paid after retaining profits for reinvestment
(d) All of the above - In case of Gordon’s Model, the MP for zero payment is zero. Its mean that:
(a) Share are not traded
(b) Share available free of cost
(c) Investors are not ready to offer any price
(d) None of the above - Gordon’s Model of dividend relevance is same as:
(a) No-growth Model of equity valuation
(b) Constant growth Model of equity valuation
(c) Price-Earnings Ratio
(d) Inverse of Price Earnings Ratio - If ‘r’ = ‘ke’, than MP by Walter’s Model and Gordon’s Model for different payout ratios would be:
(a) Unequal
(b) Zero
(c) Equal
(d) Negative - Dividend Payout Ratio is:
(a) PAT ÷ Capital
(b) DPS ÷ EPS
(c) Pref. Dividend ÷ PAT
(d) Pref. Dividend ÷ Equity Dividend - Dividend declared by a company must be paid in:
(a) 20 days
(b) 30 days
(c) 32 days
(d) 42 days - Dividend Distribution Tax is payable by:
(a) Shareholders to Government
(b) Shareholders to Company
(c) Company to Government
(d) Holding to Subsidiary Company - Share of face value of Rs. 10 are 80% paid up. The company declares a dividend of 50%. Amount of dividend per share is:
(a) Rs. 5
(b) Rs. 4
(c) Rs. 80
(d) Rs. 50 - Which of the following generally not result in increase in total dividend liability?
(a) Share-split
(b) Right Issue
(c) Bonus Issue
(d) All of the above - Dividends are paid out of:
(a) Accumulated Profits
(b) Gross Profit
(c) Profit after Tax
(d) General Reserve - In India, Dividend Distribution tax is paid on:
(a) Equity Share
(b) Preference Share
(c) Debenture
(d) Both (a) and (b) - In India, if dividend on equity shares is not paid within 30 days it is transferred to Investors Education Fund in:
(a) 2 days
(b) 3 days
(c) 4 days
(d) 7 days - Every Company should follow:
(a) High Dividend Payment
(b) Low Dividend Payment
(c) Stable Dividend Payment
(d) Fixed Dividend Payment - Constant Dividend Per share’ Policy is considered as:
(a) Increasing Dividend Policy
(b) Decreasing Dividend Policy
(c) Stable Dividend Policy
(d) None of the above - Which of the following is not a type of dividend payment?
(a) Bonus Issue
(b) Right Issue
(c) Share Split
(d) Both (a) and (b) - Which of the following is an element of dividend policy?
(a) Production capacity
(b) Change in Management
(c) Informational content
(d) Debt service capacity - Stability of dividend policy means that
(a) Same amount of dividend be paid every year
(b) Dividends be paid regularly two-three in a year
(c) Extra dividend be paid every year
(d) There need not be much variation in dividend payment over years. - Stock split is a form of
(a) Dividend Payment
(b) Bonus issue
(c) Financial restructuring
(d) Dividend in kind - In stock dividend,
(a) Authorized capital always increases
(b) Paid up capital always increases
(c) Face value per share decreases
(d) Market price for share decreases - Which of the following is not considered in Lintner’s Model?
(a) Dividend payout ratio
(b) Current EPS
(c) Speed of Adjustment
(d) Preceding year EPS - Which of the following is not relevant for dividend payment for a year?
(a) Cash flow position
(b) Profit position
(c) Paid up capital
(d) Retained Earnings