BUS 413 Final SFU - Vedrashko Questions and Answers with
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QUESTION
retained cash flows are used for __
Answer:
investing in new projects increasing cash reserves
QUESTION
excess cash flows not retained are used to __
Answer:
Repurchase shares Pay dividends
QUESTION
payout ratio
Answer:
Dividends / Earnings
QUESTION
Types of dividends
Answer:
special dividends: one-time DE, usually larger than a regular DE stock dividends: DE issued as
shares of stock, market value of equity is unchanged, shares outstanding increases Return of
Capital: paying dividends from paid-in capital, or liquidation of assets, not from current earinings
(taxed as capital gains) Liquidating dividend: return of capital to shareholders from a business
operation being terminated
QUESTION
Stock dividends and splits
Answer:
when a stock DE is over 50%, it is a split not taxed this is done to keep the share price in a
desireable range splits usually have a 2% increase in price
QUESTION
reverse split
Answer:
reduction of outstanding shares
, QUESTION
spin-offs
Answer:
firm sells a subsidiary by issuing and selling 100% of shares in the subsidiary, shares can be
distributed to existing shareholders not taxed as a cash distribution and allows to avoid
transaction costs with shares being sold to the public
QUESTION
Payout policy principles
Answer:
the need to distribute free cash flows is a first-order determinant of the overall value and timing of
payouts
QUESTION
residual dividend payout policy
Answer:
DE should be paid only if the firm has excess cash after all cash needs are met
QUESTION
the dividend decision
Answer:
firms have long term dividends managers smooth dividends managers focus on DE changes
rather than absolute levels managers are reluctant to make a change that may have to be reversed
QUESTION
share repurchases
Answer:
firms may repurchase shares over dividends
- when theu have unwanted cash or wish to change capital structure
QUESTION
choice of DE and repurchase
Answer:
regular and special dividends represent permanent and transitory payments, respectively regular
DE if earnings increase is permanent repurchase if earnings increase is temporary
Verified Solutions | Latest Update
QUESTION
retained cash flows are used for __
Answer:
investing in new projects increasing cash reserves
QUESTION
excess cash flows not retained are used to __
Answer:
Repurchase shares Pay dividends
QUESTION
payout ratio
Answer:
Dividends / Earnings
QUESTION
Types of dividends
Answer:
special dividends: one-time DE, usually larger than a regular DE stock dividends: DE issued as
shares of stock, market value of equity is unchanged, shares outstanding increases Return of
Capital: paying dividends from paid-in capital, or liquidation of assets, not from current earinings
(taxed as capital gains) Liquidating dividend: return of capital to shareholders from a business
operation being terminated
QUESTION
Stock dividends and splits
Answer:
when a stock DE is over 50%, it is a split not taxed this is done to keep the share price in a
desireable range splits usually have a 2% increase in price
QUESTION
reverse split
Answer:
reduction of outstanding shares
, QUESTION
spin-offs
Answer:
firm sells a subsidiary by issuing and selling 100% of shares in the subsidiary, shares can be
distributed to existing shareholders not taxed as a cash distribution and allows to avoid
transaction costs with shares being sold to the public
QUESTION
Payout policy principles
Answer:
the need to distribute free cash flows is a first-order determinant of the overall value and timing of
payouts
QUESTION
residual dividend payout policy
Answer:
DE should be paid only if the firm has excess cash after all cash needs are met
QUESTION
the dividend decision
Answer:
firms have long term dividends managers smooth dividends managers focus on DE changes
rather than absolute levels managers are reluctant to make a change that may have to be reversed
QUESTION
share repurchases
Answer:
firms may repurchase shares over dividends
- when theu have unwanted cash or wish to change capital structure
QUESTION
choice of DE and repurchase
Answer:
regular and special dividends represent permanent and transitory payments, respectively regular
DE if earnings increase is permanent repurchase if earnings increase is temporary
