Group 8 Presentation: Payout Policy Quiz

Question 1

Is the following statement true or false?

Market capitalization is equal to the share price multiplied by the number of shares outstanding.

Answer 1

True

Question 2

In the first quarter of 2021, ABC Bhd had repurchased its shares amounting to RM 12 million.
What is / are the effects of this transaction on ABC Bhd’s balance sheet? Choose the most accurate answer.

Answer 2

A. Both cash balance and shareholders’ equity will DECREASE by RM 12 million
B. The shareholders’ equity INCREASES by RM 12 million
C. Both cash balance and shareholders’ equity will INCREASE by RM 12 million
D. The cash balance will DECREASE by RM 12 million
Ans: A

Question 3

Given the following information:
Equity = $100 million
Debt = $25 million
Cash = $30 million
Calculate the Enterprise Value.

Answer 3

EV = Equity + Debt - Cash
Ans = $95 million

Question 4

Which of the following is the formula for Enterprise Value?

Answer 4

A. Equity + cash - debt
B. Asset + debt - equity
C. Equity + debt - cash
D. Cash + equity - debt
Ans: C

Question 5

Given the following amount information:
Debt = RM 120 million
Cash = RM 60 million
Enterprise Value = RM 450 million
Calculate the amount of equity.
EV = Equity + Debt - Cash

Answer 5

A. RM 390 million
B. RM 330 million
C. RM 570 million
D. RM 180 million
Ans: A

Question 6

When a firm decides to repurchase its own shares, the number of outstanding shares will…

Answer 6

A. Increase
B. Decrease
C. Remain the same
Ans: B

Question 7

Given the information below for ABC Bhd, what is the company’s price per share?
Market cap = RM 60 million
Outstanding shares = 5 million shares

Market cap = outstanding shares x price per share

Answer 7

A. RM 15 per share
B. RM 20 per share
C. RM 12 per share
D. RM 10 per share
Ans: C

Question 8

Given the information below for ABC Bhd, what is the company’s market capitalization?
Outstanding shares: 2 million shares
Price per share = RM 15

Answer 8

A. RM 30
B. RM 7.5 million
C. RM 30 million
Ans: C

Question 9

What are shares outstanding?

Answer 9

A. The balance amount of shares of a company that has not been issued and purchased by investors/ shareholders
B. Shares of a company that have been authorised, issued and purhcased by investors and are held by them
Ans: B

Question 10

Understanding payout policy is important because companies return significant amounts of capital back to shareholders in the form of dividends and share repurchases.

Answer 10

True