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    FM MCQ Module - 4

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    Keyur Popat
    This document contains 25 multiple choice questions related to dividend decisions and financial management. It discusses concepts from Walter's model, MM model, Gordon's model and different types of dividend policies. Key points covered include that Walter's model suggests 100% dividend payout ratio when the cost of equity is equal to the required rate of return. The MM model argues that dividend is irrelevant as the value of the firm depends on earning power, not the dividend. Gordon's model is the same as the constant growth model of equity valuation.

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    FM MCQ Module - 4

    Uploaded by

    Keyur Popat
    4K views2 pages
    This document contains 25 multiple choice questions related to dividend decisions and financial management. It discusses concepts from Walter's model, MM model, Gordon's model and different types of dividend policies. Key points covered include that Walter's model suggests 100% dividend payout ratio when the cost of equity is equal to the required rate of return. The MM model argues that dividend is irrelevant as the value of the firm depends on earning power, not the dividend. Gordon's model is the same as the constant growth model of equity valuation.

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    FM MCQ MODULE - 4

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    This document contains 25 multiple choice questions related to dividend decisions and financial management. It discusses concepts from Walter's model, MM model, Gordon's model and different types of dividend policies. Key points covered include that Walter's model suggests 100% dividend payout ratio when the cost of equity is equal to the required rate of return. The MM model argues that dividend is irrelevant as the value of the firm depends on earning power, not the dividend. Gordon's model is the same as the constant growth model of equity valuation.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    4K views2 pages

    FM MCQ Module - 4

    Uploaded by

    Keyur Popat
    This document contains 25 multiple choice questions related to dividend decisions and financial management. It discusses concepts from Walter's model, MM model, Gordon's model and different types of dividend policies. Key points covered include that Walter's model suggests 100% dividend payout ratio when the cost of equity is equal to the required rate of return. The MM model argues that dividend is irrelevant as the value of the firm depends on earning power, not the dividend. Gordon's model is the same as the constant growth model of equity valuation.

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    of 2

    MCQ – FINANCIAL MANGEMENT ASSI. PROF.

    KEYUR POPAT
    MCQ
    FINANCIAL MANAGEMENT
    By: Assi. Prof. Keyur Popat

    MODULE – 4
    DIVIDEND DECISIONS

    1. Walter’s Model suggests for 100% DP Ratio when


    (a) ke = r, (b) ke < r,
    (c) ke > r, (d) ke = 0

    2. If a firm has ke > r the Walter's Model suggests for


    (a) 0% payout, (b) 100% Payout,
    (c) 50% Payout, (d)25% Payout

    3. 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

    4. Dividend irrelevance argument of MM Model is based on:


    (a) Issue of Debentures, (b) Issue of Bonus Share,
    (c) Arbitrage , (d) Hedging

    5. 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.

    6. 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

    7. If ke = r, then under Walter's Model, which of the following is irrelevant?


    (a)Earnings per share, (b)Dividend per share,
    (c)DP Ratio, (d)None of the above

    8. 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

    9. 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

    10. In case of Gordon's Model, the MP for zero payout is zero. It means that
    (a)Shares are not traded, (b)Shares available free of cost,
    (c)Investors are not ready to offer any price, (d) None of the above

    11. 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

    12. If 'r' = 'ke', than MP by Walter's Model and Gordon's Model for different payout ratios would be
    (a) Unequal, (b)Zero,
    (c)Equal, (d)Negative

    13. Dividend Payout Ratio is


    (a) PAT÷ Capital, (b) DPS ÷ EPS,
    (c)Pref. Dividend ÷ PAT, (d)Pref. Dividend ÷ Equity Dividend

    KUM. M. H. GARDI SCHOOL OF MANAGEMENT


    MCQ – FINANCIAL MANGEMENT ASSI. PROF. KEYUR POPAT
    14. Dividend declared by a company must be paid in
    (a)20 days, (b)30 days,
    (c)32 days, (d)42 days

    15. Dividend Distribution Tax is payable by


    (a)Shareholders to Government, (b)Shareholders to Company,
    (c)Company to Government, (d)Holding to Subsidiary Company

    16. Shares of face value of Rs. 10 are 80% paid up. The company declares a dividend of 50%. Amount of
    dividend per share is
    (a)Rs. 5, (b)Rs.4,
    (c)Rs. 80, (d) Rs. 50

    17. 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

    18. Dividends are paid out of


    (a)Accumulated Profits, (b)Gross Profit,
    (c)Profit after Tax, (d)General Reserve

    19. In India, Dividend Distribution tax is paid on


    (a)Equity Share, (b)Preference Share,
    (c)Debenture, (d)Both (a) and (b)

    20. Every company should follow


    (a)High Dividend Payment, (b)Low Dividend Payment,
    (c)Stable Dividend Payment, (d)Fixed Dividend Payment

    21. '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

    22. 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)

    23. Stock split is a form of


    (a) Dividend Payment, (b)Bonus Issue,
    (c) Financial restructuring, (d) Dividend in kind

    24. 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

    25. 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

    [Answers l(c), 2(a), 3(d), 4(c), 5(c), 6(b), 7(c), 8 (a), 9(c), 10(c), 11(b), 12(c)]. 13(b), 14(b), 15(c),
    16(b), 17(a), 18(c), 19(d), 20(c), 21(c), 22(c), 23(c), 24(d), 25(d)].

    KUM. M. H. GARDI SCHOOL OF MANAGEMENT

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