Claxton Furniture, Inc. has $200 million in total assets all of which are being used at full capacity. Its sales revenues last year were $20 million with a net income of $5 million. The company’s payout ratio is 20%. If the firm has operating current liabilities of $15 million, what is the company’s self-supporting growth rate assuming the firm’s profit margin is unchanged in the next operating period?
Select one:
a.
6.86 %
b.
9.46 %
c.
4.36 %
d.
1.92 %
e.
2.21 %
Which of the following explanations of dividend policy is based on the idea that some investors prefer specific dividend policies due to tax issues or contractual constraints?
a.
Dividend Irrelevance Theory
b.
Bird-in-the-Hand Theory
c.
Residual Dividend Policy
d.
Signaling Theory
e.
Clientele Effect Theory
The agency relationship arises in the context of corporate governance because managers as agents have legal authority to act on shareholders behalf, but may have different goals that the shareholders.
Select one:
True
False
As discussed in the textbook and in class, the three major elements of distribution policy are 1) the portion of earnings which should be distributed, 2) the form in which the distribution should be made, and 3) the stability of the distributions.
Select one:
True
False
Dividends and share repurchases are both considered ways of returning capital to investors.
Select one:
True
False
Sothman Communications, Inc.currently only uses common stock and bond funding. The firm has a total debt ratio of 50%. Management believes the current level of financial leverage is optimal and therefore wants to maintain the current debt ratio. The company anticipates that it will have profitable investment opportunities of $6 million during the next year. If Mainline reports net income of $10 million, and it follows a residual dividend payout policy, what will be its dividend payout ratio?
Round your answer to two decimal places.
Answer:
Assuming that a profitable firm has a dividend payout ratio of .50 and accounts payable resulting from trade credit offered by its suppliers, which of the following must be correct.
Select one:
a.
The internal growth rate is greater than the self-supporting growth rate.
b.
The self-supporting growth rate is greater than the internal growth rate.
c.
Both the internal growth rate and the self-supporting growth rate are greater than zero.
d.
The internal growth rate is larger than the firm’s ROA.
e.
B. and C.
The awarding of stock options can be used to align manager actions with shareholder goals since such stock options only have value if the company’s stock price increases.
Select one:
True
False
Managerial entrenchment is a tern used to describe situations in which it is difficult or impossible to remove current management.
Select one:
True
False
