All Exams >
B Com >
Business Economics & Finance >
All Questions
All questions of Dividend Policy for B Com Exam
What effect does the issuance of bonus shares have on a company's market price per share?- a)It increases the market price per share.
- b)It decreases the market price per share.
- c)It has no impact on the market price per share.
- d)It doubles the market price per share.
Correct answer is option 'B'. Can you explain this answer?
a)
It increases the market price per share.
b)
It decreases the market price per share.
c)
It has no impact on the market price per share.
d)
It doubles the market price per share.
|
Dev Patel answered |
The issuance of bonus shares decreases the market price per share. This is because the total number of shares increases while the overall market capitalization remains the same. As a result, the price per share is reduced, making the shares more affordable for investors.
What impact does the issuance of bonus shares have on a company's earnings per share (EPS)?- a)It decreases the EPS.
- b)It increases the EPS.
- c)It has no effect on the EPS.
- d)It doubles the EPS.
Correct answer is option 'A'. Can you explain this answer?
a)
It decreases the EPS.
b)
It increases the EPS.
c)
It has no effect on the EPS.
d)
It doubles the EPS.
|
|
Dev Patel answered |
The issuance of bonus shares decreases the company's earnings per share (EPS). This is because the total earnings of the company remain the same, but the number of outstanding shares increases due to the bonus issue. As a result, the earnings are distributed among a larger number of shares, leading to a decrease in EPS.
In what circumstances do companies typically declare special dividends?- a)When they want to dilute the ownership of existing shareholders.
- b)When they experience abnormal profits.
- c)When they aim to reduce their goodwill.
- d)When they issue bonus shares.
Correct answer is option 'B'. Can you explain this answer?
a)
When they want to dilute the ownership of existing shareholders.
b)
When they experience abnormal profits.
c)
When they aim to reduce their goodwill.
d)
When they issue bonus shares.
|
|
Dev Patel answered |
Companies typically declare special dividends when they experience abnormal profits. Special dividends are usually declared in exceptional circumstances when a company has generated significant profits beyond its regular earnings. It is a way to distribute these exceptional profits to shareholders.
Which factor determines the increase in paid-up capital when bonus shares are issued?- a)The company's current market capitalization.
- b)The number of existing shareholders.
- c)The company's profits and reserves.
- d)The voting rights of shareholders.
Correct answer is option 'C'. Can you explain this answer?
a)
The company's current market capitalization.
b)
The number of existing shareholders.
c)
The company's profits and reserves.
d)
The voting rights of shareholders.
|
|
Dev Patel answered |
The increase in paid-up capital when bonus shares are issued is determined by the company's profits and reserves. Bonus shares are issued by capitalizing a portion of the company's accumulated profits and reserves, which are then converted into additional shares. This process results in an increase in the company's paid-up capital without any monetary transaction.
What is the significance of maintaining a stable dividend policy for shareholders?- a)It increases the number of bonus shares issued.
- b)It reduces the tax benefits for shareholders.
- c)It provides a reliable source of income for shareholders.
- d)It results in fluctuating share prices.
Correct answer is option 'C'. Can you explain this answer?
a)
It increases the number of bonus shares issued.
b)
It reduces the tax benefits for shareholders.
c)
It provides a reliable source of income for shareholders.
d)
It results in fluctuating share prices.
|
|
Dev Patel answered |
Maintaining a stable dividend policy is significant for shareholders because it provides a reliable source of income for them. Shareholders who depend on dividends for income, such as retirees, widows, and economically weaker individuals, benefit from a consistent and predictable dividend payout. It helps meet their day-to-day living expenses and provides financial stability.
What is the primary purpose of issuing bonus shares by a company?- a)To increase the market price of the company's shares.
- b)To provide immediate cash to shareholders.
- c)To reward shareholders without affecting the company's liquidity.
- d)To decrease the company's goodwill in the capital market.
Correct answer is option 'C'. Can you explain this answer?
a)
To increase the market price of the company's shares.
b)
To provide immediate cash to shareholders.
c)
To reward shareholders without affecting the company's liquidity.
d)
To decrease the company's goodwill in the capital market.
|
|
Dev Patel answered |
The primary purpose of issuing bonus shares by a company is to reward shareholders without affecting the company's liquidity. Bonus shares are issued by capitalizing a part of the company's profits and reserves, which are distributed among existing shareholders free of cost. This allows shareholders to benefit from the company's success without receiving cash dividends, and it helps in retaining capital within the company for future growth and investments.
What role does the perception of investors play in the decision to issue bonus shares?- a)Perception of investors has no influence on the decision.
- b)It encourages companies to issue bonus shares.
- c)It discourages companies from issuing bonus shares.
- d)It leads to the payment of cash dividends instead.
Correct answer is option 'B'. Can you explain this answer?
a)
Perception of investors has no influence on the decision.
b)
It encourages companies to issue bonus shares.
c)
It discourages companies from issuing bonus shares.
d)
It leads to the payment of cash dividends instead.
|
|
Dev Patel answered |
The perception of investors plays a significant role in the decision to issue bonus shares. When investors perceive a company's stock positively due to the issuance of bonus shares, it can boost investor confidence and attract more investments. This, in turn, may encourage companies to issue bonus shares as a way to improve their image in the capital market.
How does a stock split affect the ownership structure of a company?- a)It dilutes the ownership of existing shareholders.
- b)It consolidates ownership for existing shareholders.
- c)It has no impact on the ownership structure.
- d)It increases the voting rights of existing shareholders.
Correct answer is option 'A'. Can you explain this answer?
a)
It dilutes the ownership of existing shareholders.
b)
It consolidates ownership for existing shareholders.
c)
It has no impact on the ownership structure.
d)
It increases the voting rights of existing shareholders.
|
|
Dev Patel answered |
A stock split dilutes the ownership of existing shareholders. While the number of shares held by each shareholder increases, their proportional ownership of the company decreases. This means that each shareholder holds a smaller percentage of the company's total ownership after a stock split.
Why do some investors consider stock splits as a buying indicator?- a)Stock splits increase the company's earnings.
- b)Stock splits indicate that the company is financially unstable.
- c)Stock splits make shares more affordable.
- d)Stock splits provide tax benefits to investors.
Correct answer is option 'C'. Can you explain this answer?
a)
Stock splits increase the company's earnings.
b)
Stock splits indicate that the company is financially unstable.
c)
Stock splits make shares more affordable.
d)
Stock splits provide tax benefits to investors.
|
|
Dev Patel answered |
Some investors consider stock splits as a buying indicator because stock splits make shares more affordable. When a company's stock price is split, the price per share decreases, making it more accessible to a broader range of investors. This increased affordability can attract new investors and drive up demand for the stock.
How does the issuance of bonus shares impact the market capitalization of a company?- a)It increases the market capitalization.
- b)It decreases the market capitalization.
- c)It has no effect on the market capitalization.
- d)It doubles the market capitalization.
Correct answer is option 'C'. Can you explain this answer?
a)
It increases the market capitalization.
b)
It decreases the market capitalization.
c)
It has no effect on the market capitalization.
d)
It doubles the market capitalization.
|
|
Dev Patel answered |
The issuance of bonus shares has no effect on the market capitalization of a company. Market capitalization is determined by multiplying the market price per share by the total number of outstanding shares. When bonus shares are issued, the number of shares increases, but the market price per share decreases proportionally. Therefore, the overall market capitalization remains the same.
Chapter doubts & questions for Dividend Policy - Business Economics & Finance 2025 is part of B Com exam preparation. The chapters have been prepared according to the B Com exam syllabus. The Chapter doubts & questions, notes, tests & MCQs are made for B Com 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests here.
Chapter doubts & questions of Dividend Policy - Business Economics & Finance in English & Hindi are available as part of B Com exam.
Download more important topics, notes, lectures and mock test series for B Com Exam by signing up for free.
Business Economics & Finance
69 videos|121 docs|23 tests
|
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up
within 7 days!
within 7 days!
Takes less than 10 seconds to signup