# Dividend Policy Questions and Answers ### Dividend Policy in Financial Management Multiple Choice Questions Quiz:

Ques. Dividend Payout Ratio is:
(a) PAT Capital
(b) DPS ÷ EPS
(c) Pref. Dividend ÷ PAT
(d) Pref. Dividend ÷ Equity Dividend

Ans. (b)

Ques. In order to calculate EPS, Profit after Tax and Preference Dividend is divided by:
(a) MP of Equity Shares
(b) Number of Equity Shares
(c) Face Value of Equity Shares
(d) None of the above

Ans. (b)

Ques. __ measure what a company’s pays out to investors in the form of dividend
(a) return on equity
(b) dividend payout ratio
(c) book value

Ques. In case of ___ preference shares, the arrears of dividend are carried forward and paid out of the profits of the subsequent years.
(a) Participating
(b) Convertible
(c) Cumulative
(d) Redeemable

Ans. (c)

Ques. _____ Preference shares carry the right to cumulate the dividends
(a) Converted
(b) Cumulative
(c) Non-converted
(d) None

Ans. (b)

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Ques. MM Model of Dividend irrelevance uses arbitrage between
(a) Dividend and Bonus
(b) Dividend and Capital Issue
(c) Profit and Investment
(d)None of the above

Ans. (b)

Ques. MM Model argues that dividend is irrelevant as
(a) the value of the firm depends upon earning power
(b) the investors buy shares for capital gain
(c) dividend is payable after deciding the retained earnings
(d) dividend is a small amount

Ans. (a)

Ques. The dividend declared between two annual general meeting is called ……….
(a) Proposed Dividend
(b) Final Dividend
(c) Interim Dividend
(d) None of these

Ans. (c)

Ques. Dividend Payout Ratio is
(a) PAT ÷ Capital
(b) DPS ÷ EPS
(c)Pref. Dividend ÷ PAT
(d)Pref. Dividend ÷ Equity Dividend

Ans. (b)

Ques. Dividend declared by a company must be paid in
(a) 20 days
(b) 30 days
(c) 32 days
(d) 42 days

Ans. (b)

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Ques. ‘Constant Dividend Per Share’ Policy is considered as:
(a) Increasing Dividend Policy
(b) Decreasing Dividend Policy
(c) Stable Dividend Policy
(d) None of the above

Ans. (c)

Ques. Which of the following is not a type of dividend payment?
(a) Bonus Issue
(b) Right Issue
(c) Share Split
(d) Both (b) and (c)

Ans. (c)

Ques. Dividend in the form of shares is called ___
(a) Interim Dividend
(b) Scrip Dividend
(c) Final Dividend
(d) None of these

Ans. (b)

Ques. How to calculate dividend yield
(a) annual dividend per share / stock price by share
(b) monthly dividend per sale / price
(c) none of these

Ques. In stock dividend:
(a) Authorized capital always increases
(b) Paid up capital always increases
(c) Face value per share decreases
(d) Market price for share decreases

Ans. (d)

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Ques. Which of the following is not relevant for dividend payment for a year?
(a) Cash flow position
(b) Profit position
(c) Paid up capital
(d) Retained Earnings

Ans. (d)

Ques. Which of the following generally not result in increase in total dividend liability ?
(a) Share-split
(b) Right Issue
(c) Bonus Issue
(d) All of the above

Ans. (a)

Ques. Dividends are paid out of
(a) Accumulated Profits
(b) Gross Profit
(c) Profit after Tax
(d) General Reserve

Ans. (c)

Ques. The dividend recommended by the Board of Directors is called __
(a) Proposed Dividend
(b) Final Dividend
(c) Interim Dividend
(d) None of these

Ans. (a)

Ques. Residuals Theory argues that dividend is a
(a) Relevant Decision
(b) Active Decision
(c) Passive Decision
(d) Irrelevant Decision

Ans. (c)

Ques. Dividend irrelevance argument of MM Model is based on:
(a) Issue of Debentures
(b) Issue of Bonus Share
(c) Arbitrage
(d) Hedging

Ans. (c)

Ques. Gordon’s Model of dividend relevance is same as
(a) No-growth Model of equity valuation
(b) Constant growth Model of equity valuation
(c) Price-Earning Ratio
(d) Inverse of Price Earnings Ratio

Ans. (b)

Ques. Every company should follow
(a) High Dividend Payment
(b) Low Dividend Payment
(c) Stable Dividend Payment
(d) Fixed Dividend Payment

Ans. (c)

Ques. Profit available for dividend distribution is called ___
(a) Capital profit
(b) Divisible profit
(c) Capital Reserve
(d) None of these

Ans. (b)

Ques. Which of the following stresses on investor’s preference reorient dividend than higher future capital gains ?
(a) Walter’s Model
(b) Residuals Theory
(c) Gordon’s Model
(d) MM Model

Ans. (c)

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Ques. Walter’s Model suggests that a firm can always increase i.e. of the share by
(a) Increasing Dividend
(b) Decreasing Dividend
(c) Constant Dividend
(d) None of the above

Ans. (d)

Ques. Which of the following is not true for MM Model?
(a) Share price goes up if dividend is paid
(b) Share price goes down if dividend is not paid
(c) Market value is unaffected by Dividend policy
(d) All of the above

Ans. (c)

Ques. Which of the following represents passive dividend policy ?
(a) that dividend is paid as a % of EPS
(b) that dividend is paid as a constant amount
(c) that dividend is paid after retaining profits for reinvestment
(d) all of the above

Ans. (c)

Ques. __ is the dividend declared in the annual general meeting of shareholders.
(a) Proposed Dividend
(b) Final Dividend
(c) Interim Dividend
(d) None of these

Ans. (b)

Ques. Dividend Distribution Tax is payable by
(a) Shareholders to Government
(b) Shareholders to Company
(c) Company to Government
(d) Holding to Subsidiary Company

Ans. (c)

Ques. In India, Dividend Distribution tax is paid on
(a) Equity Share
(b) Preference Share
(c) Debenture
(d) Both (a) and (b)

Ans. (d)

Ques. Unclaimed dividend is shown in the balance sheet under the head ……..
(a) Reserves and Surplus
(b) Current Liabilities
(d) Current Assets

Ans. (b)

Ques. If the following is an element of dividend policy?
(a) Production capacity
(b) Change in Management
(c) Informational content
(d) Debt service capacity

Ans. (c)

Ques. Cumulative preference share holders have voting right if dividend are in arrears for years
(a) 1
(b) 2
(c) 3
(d) 4

Ans. (b)

Ques. The net profit available for dividend distribution is called __
(a) Net Profit
(b) Surplus
(c) Divisible Profit
(d) Capital Profit

Ans. (c)

Ques. These shares have a preferential right to the payment of dividend and to the return of capital at the time of winding up of the company.
(a) Equity share
(b) Preference share
(c) Bonus share
(d) None of the above

Ques. Dividends are usually paid as a percentage of ______
(a) Authorized share capital
(b) Net profit
(c) Paid-up capital
(d) Called-up capital

Ans. (c)