1)The increasing sophistication of individual investors has decreased the role o

Question

1)The increasing sophistication of individual investors has decreased the role of institutional investors in the stock market.
2)Some preferred stocks are participating preferreds and this may allow for an increase in the preferred stock dividend when the common stock dividend equals the preferred stock dividend.
3)Floating rate preferred stock allows shareholders to receive more or less than the quoted dividend based on the firm's success.
4)Common stockholders have a legal claim to dividend income.
5)Because of tax considerations, corporations often are able to issue preferred stock at a slightly lower yield than debt.
6)The difference between the rights-on and ex-rights common stock price is equal to the value of a right.
7)Preferred stock would generally provide a lower before-tax yield to investors than secured debt due to its lower risk.
8)A stock split involves a reduction in the firm's retained earnings account.
9)Investors in high marginal tax brackets usually prefer companies that reinvest most of their earnings, thus creating more growth in earnings and stock prices and deferring taxes into the future.
10)When a firm raises its dividend, the information content is usually positive for investors.
11)Regardless of the situation, no well-managed firm would borrow money to pay dividends to stockholders.
12)The goal of a company in the growth lifecycle stage should be to maximize dividends to shareholders.
13)A reverse stock split is normally used by those firms whose stock price has been stable for several years.
14)Retained earnings accurately portray the liquidity position of the firm.

Explanation / Answer

1. True Reason: The mediating bodies like institutional investors are avoided to excutete the tranasations. 2.False Reason: The "preferred " in this case priorty to take dividen rather than common stock holders , It deos not mean that to take higher dividend. 3.False: The dividend will be based on the Market interest rate not firms sucess. 4.False Since thay don't have leagal right to take dividend, 5.False: If they considered tax provision ,it is better to isuue debt rather than Preferred stock, Since No tax deduction will be avil for the declaration of "Dividend" at the same time Interest can be allowed item from Tax. 6.False, Rights on is having right to access the offering the saheres, where ex -rights doesn't 7.True, 8.False Since when 'stock split' takes place only the Par value can be split, there will not have any impact on Firm's Reatined Earnings. 9.False: Invenstments in sahares also having " Tax burden" under the head of "Capital Gains" 10.True Raising of dividend can be positve signal for "Invenstors" 11.True, Dividend are to be paid only out of "sufficeint reained easrning only" 12.Fasle The comapny goal to maximise the 'Wealth' of the share holders 13.True 14.False It doesn't come under the 'liquidity'

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