Stock splits and large stock dividends have the same effect on a company's retained earnings and total stockholders' equity.

Stock splits and large stock dividends have the same effect on a company's retained earnings and total stockholders' equity.

Answer: false

The rate of return on common stock equity is computed by dividing net income by the average common stockholders' equity.

The rate of return on common stock equity is computed by dividing net income by the average common stockholders' equity.

Answer: false

The payout ratio is determined by dividing cash dividends paid to common stockholders by net income available to common stockholders.

The payout ratio is determined by dividing cash dividends paid to common stockholders by net income available to common stockholders.

Answer: true

The residual interest in a corporation belongs to the

The residual interest in a corporation belongs to the

a. management.
b. creditors.
c. common stockholders.
d. preferred stockholders.


Answer: common stockholders.

The pre-emptive right of a common stockholder is the right to

The pre-emptive right of a common stockholder is the right to

a. share proportionately in corporate assets upon liquidation.
b. share proportionately in any new issues of stock of the same class.
c. receive cash dividends before they are distributed to preferred stockholders.
d. exclude preferred stockholders from voting rights.


Answer: share proportionately in any new issues of stock of the same class

The pre-emptive right enables a stockholder to

The pre-emptive right enables a stockholder to

a. share proportionately in any new issues of stock of the same class.
b. receive cash dividends before other classes of stock without the pre-emptive right.
c. sell capital stock back to the corporation at the option of the stockholder.
d. receive the same amount of dividends on a percentage basis as the preferred stockholders.


Answer: share proportionately in any new issues of stock of the same class.

Callable preferred stock permits the corporation at its option to redeem the outstanding preferred shares at stipulated prices.

Callable preferred stock permits the corporation at its option to redeem the outstanding preferred shares at stipulated prices.

Answer: true