1-Stock dividends and stock splits should, at least conceptually, have the same
ID: 2735417 • Letter: 1
Question
1-Stock dividends and stock splits should, at least conceptually, have the same effect on shareholders' wealth.
True
False
2-The optimal distribution policy strikes that balance between current dividends and capital gains that maximizes the firm's stock price.
True
False
3-Two important issues in corporate governance are (1) the rules that cover the board's ability to fire the CEO and (2) the rules that cover the CEO's ability to remove members of the board.
True
False
4-A poison pill is also known as a corporate restructuring.
True
False
Explanation / Answer
ans 1 - is True - In stock dividend and in stock split though the numbers of shares outstanding increases but it does not increase the value of shares together, thus does not increase the wealth of share holders hence conceptually it does not impact the wealth of share holders
ans 2- is True, In optimum distribution policy attentions are given on maximising the share holders wealth by drawing a line of balance b/w dividends and capital gain.
ans 3- is False - Corporate governance main functionary is running the company ethically, it look after the company's affairs, It decides the roles and responsibility of board but doe not authorise them to remove the ceo, removal of ceo takes place at the board meeting with the concensus of the share holders. and Board members also removed with consensus of share holders not just on the will of ceo
Ans 4- False - Poision pill is not corporate structuring rather it would be better to say that it is a a strategy adopted by the company in order to have a check on any hostile take over, company deliberately makes their stocks so unattractive that acquired does not feel like buying it, hnece it is not a corporte structuring.
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