Final Ch18

Question 1

dividends: legal rules

Answer 1

most states forbid payment of dividends that might impair the initial capital contributions to the firm

Question 2

dividends: access to capital markets

Answer 2

A medium-to-large size company that is willing to pay dividends will relatively have easy access to financial markets

Question 3

dividends: desire for control

Answer 3

small firms: may hold back dividends

larger firms: stockholders may demand removal of management if dividends are withheld

Question 4

holder of record date

Answer 4

date on which the firm examines its books to determine who is entitled to cash dividends

Question 5

ex-dividend date

Answer 5

2 business dates before the holder of record date

Question 6

dividend payment date

Answer 6

date when checks will be sent to the entitles stockholders

Question 7

stock dividend

Answer 7

A dividend payment made in the form of additional shares, rather than a cash payout.

Question 8

stock splits

Answer 8

company divides its existing shares into multiple shares

Question 9

reverse stock splits

Answer 9

when a firm exchanges fewer shares for existing shares with the intent of increasing the stock price