7 When a firm enters Stage III of its life cycle which of th

7. When a firm enters Stage III of its life cycle, which of the following is NOT likely to be observed?
A.Dividend payout ratios are likely to rise to a moderate level of 20-30% of earnings.
B.More competition is likely to enter the firm\'s market.
C.Sales begin to decrease.
D.Stock splits are common.

8. Stockholders may prefer cash dividends to reinvestment
A.because dividends may resolve some uncertainty.
B.because dividend payments have an information content.
C.because investors may prefer current cash to future cash.
D.all of these options are correct.

10. A major desire of stockholders regarding dividend policy is
A.frequent stock dividends.
B.dividend stability.
C.high payouts when earnings are up, and lower payouts when earnings are down.
D.to give out no dividends, so that the company can use the cash towards future growth.

13.The primary purpose of a stock split is to
A.indicate the firm\'s desire to retain funds.
B.increase the investor\'s overall wealth.
C.reduce the threat of a takeover by creating more shares.
D.bring the stock price to a lower trading range.

Solution

Answer for question no. 7 is option C i.e. sales begins to decrease. This is not likely to happen in stage 3 of the life-cycle of a firm.

Answer for question no. 8 is option D i.e. all the given options.

Answer for question no. 10 is option B i.e. dividend stability is the major desire of stockholders regarding dividend policy.

Answer for question no. 13 is option D i.e. bring the stock price to a lower trading range.