Question

QUESTION : True or False

A) Rapidly growing technology firms are well known for providing dividends to their shareholders.

True

False

B) A stock dividend is a lower cost alternative to a cash dividend and can be considered at all but the initial stages of a corporate life cycle.

True

False

C) A poison pill strategy should be considered long before an invasive corporate raider attempts to buy your firm.

True

False

D) The declaration of a dividend is an information signal to the marketplace about future prospects for the organization.

True

False

E) A consistent dividend policy should be known by the market and shareholders and should be maintained.

True

False

Answer 1

1. False. Growing technology companies cashflows are unpredictable and will be used most of the cash for the investments for expansion. First they concentrate on how to grow rather than distributing the cash in the form of dividends.

2.True. For companies who don't have enough cash to pay the dividends will issue the stock as dividend. Stock dividend will just increase the number of shares, but not the value. After the issue, share price will adjust automatically making the over all value unchanged.

3.False. Poision pill clause can be adopted by comapny's board of directors to deter the aggressive takeover bid even without the consent from the shareholders.

4.True. Any comapny will pay dividends only after enough cash is reserved for any capex. Mature and well established firms maintains dividend policy and any negative dividend distribution will trigger some bad sentiments among the investors. At the same time, if a growing company gives dividends, then investors think that company is in a good position which is why they are paying the cash sops.

5.True. Companies adopt few dividend policies and they are paying consistently, obviously market (investors) expect that to be continued indefinitely.Any negative deviation from it will have adverse repurcussions like huge sell off of the particular company's shares.