FIN 306 CH. 14 EXAM QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026
1. Which one of the following is a payment of either cash or shares of stock that is paid out of
earnings to a firm's shareholders?
A. Interest
B. Distribution
C. Retained earnings
D. Dividend
E. Stock repurchase - Answers D
2. Which one of the following is a payment by a firm to its shareholders from any source other than
current or accumulated retained earnings?
A. Interest
B. Distribution
C. Retained earnings
D. Dividend
E. Stock repurchase - Answers B
3. Which one of the following best defines a regular cash dividend?
A. Distribution by a firm to its shareholders
B. Payment from any source by a firm to its owners
C. One-time payment of cash by a firm to its shareholders
D. Cash payment by a firm to its owners as part of a firm's normal operations
E. Distribution of the proceeds from the sale of a portion of a firm's operations - Answers D
4. Which one of the following is the date on which the board of directors agrees to pay a dividend and
passes a resolution to do so?
A. Date of record
B. Ex-dividend date
C. Payment date
D. Declaration date
E. Public announcement date - Answers D
5. The ex-dividend date is defined as _____ day(s) before the date of record.
A. three business
B. three
C. two business
D. two
E. one - Answers C
6. On which one of the following dates is the determination made as to which shareholders will
receive a dividend payment?
A. Date of record
B. Ex-dividend date
C. Payment date
D. Declaration date
E. Public announcement date - Answers A
7. On which one of the following dates are dividend checks mailed?
A. Date of record
B. Ex-dividend date
C. Payment date
D. Declaration date
E. Public announcement date - Answers C
8. The clientele effect states that investors fall into various groups because of differences in their
preferences for which one of the following?
, A. Share price levels
B. Risk level
C. Short-term versus long-term investments
D. Rates of return
E. Dividends - Answers E
9. This morning, Lambert Materials bought 10,000 of its outstanding shares in the open market. What
type of transaction was this?
A. Stock payout
B. Stock distribution
C. Stock dividend
D. Stock repurchase
E. Stock reversal - Answers D
10. Which one of the following is a non-cash payment made by a firm to its shareholders and is a
payment that lessens the value of each outstanding share?
A. Reverse stock split
B. Cash distribution
C. Stock dividend
D. Regular dividend
E. Liquidating dividend - Answers C
11. Which one of the following increases the number of shares outstanding but does not increase the
value of owner's equity?
A. Stock repurchase
B. Reverse stock split
C. Stock split
D. Cash distribution
E. Liquidating dividend - Answers C
12. During the past year, ABC stock has sold for as little as $19 a share and a much as $33 a share.
Which one of the following terms applies to these prices?
A. Benchmark values
B. Price splits
C. Price dividers
D. Split range
E. Trading range - Answers E
13. Which one of the following reduces the number of shares outstanding but does not change a
firm's total equity?
A. Stock split
B. Distribution
C. Reverse split
D. Liquidation
E. Redemption - Answers C
14. Lester's Dry Goods paid $1.10 per share in dividends last year. The company currently has excess
cash and would like to distribute $0.40 a share to its shareholders. However, the company is
concerned about increasing the dividend by that amount as it will not be able to afford any increase in
the future and doesn't want to lower the dividend once it has been raised. Which one of the following
is probably the best suggestion for distributing the $0.40 per share?
A. Special dividend of $0.40 per share
B. Extra cash dividend of $0.40 per share
C. Liquidating dividend of $0.40 per share
D. Increase the regular dividend by $0.11 and pay a special dividend of $0.29
E. Increase the regular dividend by $0.11 and pay an extra cash dividend of $0.29 - Answers A
1. Which one of the following is a payment of either cash or shares of stock that is paid out of
earnings to a firm's shareholders?
A. Interest
B. Distribution
C. Retained earnings
D. Dividend
E. Stock repurchase - Answers D
2. Which one of the following is a payment by a firm to its shareholders from any source other than
current or accumulated retained earnings?
A. Interest
B. Distribution
C. Retained earnings
D. Dividend
E. Stock repurchase - Answers B
3. Which one of the following best defines a regular cash dividend?
A. Distribution by a firm to its shareholders
B. Payment from any source by a firm to its owners
C. One-time payment of cash by a firm to its shareholders
D. Cash payment by a firm to its owners as part of a firm's normal operations
E. Distribution of the proceeds from the sale of a portion of a firm's operations - Answers D
4. Which one of the following is the date on which the board of directors agrees to pay a dividend and
passes a resolution to do so?
A. Date of record
B. Ex-dividend date
C. Payment date
D. Declaration date
E. Public announcement date - Answers D
5. The ex-dividend date is defined as _____ day(s) before the date of record.
A. three business
B. three
C. two business
D. two
E. one - Answers C
6. On which one of the following dates is the determination made as to which shareholders will
receive a dividend payment?
A. Date of record
B. Ex-dividend date
C. Payment date
D. Declaration date
E. Public announcement date - Answers A
7. On which one of the following dates are dividend checks mailed?
A. Date of record
B. Ex-dividend date
C. Payment date
D. Declaration date
E. Public announcement date - Answers C
8. The clientele effect states that investors fall into various groups because of differences in their
preferences for which one of the following?
, A. Share price levels
B. Risk level
C. Short-term versus long-term investments
D. Rates of return
E. Dividends - Answers E
9. This morning, Lambert Materials bought 10,000 of its outstanding shares in the open market. What
type of transaction was this?
A. Stock payout
B. Stock distribution
C. Stock dividend
D. Stock repurchase
E. Stock reversal - Answers D
10. Which one of the following is a non-cash payment made by a firm to its shareholders and is a
payment that lessens the value of each outstanding share?
A. Reverse stock split
B. Cash distribution
C. Stock dividend
D. Regular dividend
E. Liquidating dividend - Answers C
11. Which one of the following increases the number of shares outstanding but does not increase the
value of owner's equity?
A. Stock repurchase
B. Reverse stock split
C. Stock split
D. Cash distribution
E. Liquidating dividend - Answers C
12. During the past year, ABC stock has sold for as little as $19 a share and a much as $33 a share.
Which one of the following terms applies to these prices?
A. Benchmark values
B. Price splits
C. Price dividers
D. Split range
E. Trading range - Answers E
13. Which one of the following reduces the number of shares outstanding but does not change a
firm's total equity?
A. Stock split
B. Distribution
C. Reverse split
D. Liquidation
E. Redemption - Answers C
14. Lester's Dry Goods paid $1.10 per share in dividends last year. The company currently has excess
cash and would like to distribute $0.40 a share to its shareholders. However, the company is
concerned about increasing the dividend by that amount as it will not be able to afford any increase in
the future and doesn't want to lower the dividend once it has been raised. Which one of the following
is probably the best suggestion for distributing the $0.40 per share?
A. Special dividend of $0.40 per share
B. Extra cash dividend of $0.40 per share
C. Liquidating dividend of $0.40 per share
D. Increase the regular dividend by $0.11 and pay a special dividend of $0.29
E. Increase the regular dividend by $0.11 and pay an extra cash dividend of $0.29 - Answers A
