Strategic Financial Management

Question 1

What is an IPO?

Answer 1

An IPO is the first sale of stock by a private company to the public, used to raise new equity capital, which provide additional shares; and special dividends, which are non-recurring payments.

Question 2

What are the different types of dividends?

Answer 2

• Cash Dividend
• Stock dividends
• Special dividends
• Share buybacks

Question 3

What is the signalling theory of dividends?

Answer 3

It suggests that a company increasing its dividend payments signals confidence in its future earnings, whereas a cut in dividends might indicate financial difficulties.

Question 4

What is the Clientele Theory on Dividends?

Answer 4

Different dividend policies attract different types of investors.

Question 5

What factors influence a company’s dividend policy?

Answer 5

• Profitability
• Contractual constraints
• Tax considerations
• Market trends
• Company’s investment opportunities

Question 6

What is a Seasoned Equity Offering (SEO) and how does it typically affect the stock market?

Answer 6

An SEO involves a public company issuing more shares to raise capital. It typically results in the dilution of existing shares and can temporarily depress stock prices due to increased supply.