FIN 370 Module 2 Corporate Policy Ch. 15,
16, 21. (100% Correct Review Test 2023
Update) A+
optimal distribution policy - Correct Answer-The
... [Show More] distribution policy that maximizes the
value of the firm by choosing the optimal level and form of distributions (dividends and
stock repurchases).
target distribution ratio - Correct Answer-percentage of net income distributed to
shareholders through cash dividends or stock repurchases
Target Payout Ratio - Correct Answer-the target percentage of net income paid out as
cash dividends
Dividend Irrelevance Theory - Correct Answer-The theory that a firm's dividend policy
has no effect on either its value or its cost of capital
Bird In the Hand Theory (Dividend Preference) - Correct Answer-a return in the form of
dividends is a sure thing, but a return in the form of capital gains is risky, in other words,
"a bird in the hand is worth more than two in the bush"
dividend tax penalty - Correct Answer-Occurs if dividend are taxes more highly than
capital gains
tax effect theory - Correct Answer-states that investors prefer that companies minimize
dividends
special dividends - Correct Answer-favorable circumstances allow the firm to make a
one-time cash payment to shareholders, in addition to any regular dividends the firm
pays.
Clientele Effect - Correct Answer-the observable fact that stocks attract particular
groups based on dividend yield and the resulting tax effects
401(k) Retirement Plan - Correct Answer-A retirement savings plan sponsored by an
employer which lets workers save and invest a piece of their paycheck before taxes are
taken out. Taxes aren't paid until the money is withdrawn from the account.
Defined Contribution - Correct Answer-a pension plan specifying the contributions that
both employer and employee must make; it makes no promises concerning the size of
the benefits at retirement
Signaling Hypothesis - Correct Answer-argue that price changes following dividend
actions simply indicate the dividend changes convey information
Continues... [Show Less]