Finance Quizzes

Finance2 Quiz 2- Attempt 1
QUESTION 1
When the firm has a high retention ratio, thus paying low dividends, the dividend is a by-product of what kind of decision? A. Borrowing B. Capital budgeting C. Debt policy D. Financing

QUESTION 2
Last year's return on equity was 30 percent, and while the same amount of earnings was generated this year, the ROE has decreased to 20 percent. The firm has no preferred stock. What caused the decrease? A. Equity decreased by 10 percent.

B. Equity decreased by 50 percent. C. Equity increased by 50 percent. D. Equity increased by 10 percent.

QUESTION 3
A corporation's dividend payout ratio is the percentage of _____ paid out as dividends. A. earnings B. earnings before interest and taxes C. retained earnings D. cash

QUESTION 4
According to pecking-order theory, managers will often choose to finance with: A. new equity rather than debt, to strengthen EPS. B. debt rather than new equity, to avoid reduced share price. C. new equity rather than debt, due to bankruptcy costs. D. debt rather than retained earnings, to lower the WACC.

QUESTION 5
The primary purpose of laws prohibiting a firm from paying dividends that include its legal capital is to: A. ensure that the balance sheet balances. B. prevent managers from paying out all the firm's assets. C. reduce investors' tax liability. D. prevent managers from paying large dividends.

QUESTION 6
What is the after-tax cost of debt for a firm in the 35 percent tax bracket that pays 15 percent on its debt? A. 5.25 percent After-tax cost of debt = (1 – Tc) rdebt = .65 x .15 = 9.75% B. 12.17 percent C. 20.25 percent D. 9.75 percent

QUESTION 7
An investor who owns stock on the company's __________ date will receive the dividends declared. A. with-dividend B. ex-dividend C.