All categories

2 years ago

Which of the following are not legitimate constraints on the dividends a firm will pay to shareholders?

Business

1 answer:

Arada [10]2 years ago

8 0

Answer:

D. All are legitimate constraints on the dividends that firms choose to pay to shareholders.

Explanation:

All of these are legitimate constraints.

For A, a company may simply have limited cash flows and as such can not pay any dividends. They may still be making profits and may declare dividends but the payment may not be made until subsequent period when cash is available.

For B, Bondholder covenants legally bind firms as issuing authorities from certain practices, for example a bond covenant may bind a firm to have interest cover of at least 2 times retained and as such there may be very little retained earnings left to pay for dividends.

For C, some forms of businesses like insurance companies or banks are restricted by law that they can not pay dividends if it means a capital reduction. These businesses have legal capital requirements that they must maintain and thus they cannot reduce capital in lieu of making dividend payments.

Hope that helps.

You might be interested in

An ordinary annuity selling at $4,947.11 today promises to make equal payments at the end of each year for the next eight years

Kryger [21]

Answer:

$812.49

Explanation:

Given that

Sale value of ordinary annuity = $4,947.11

Time period = 8 years

Interest rate = 6.50%

So by considering the above information, the annual annuity payment is

$4,947.11 = Annual annuity payment × Present value annuity factor at 6.5% for 8 years

$4,947.11 = Annual annuity payment × 6.0888

So, the annual annuity payment is $812.49

7 0

2 years ago

A bond with a coupon rate of 7% makes semiannual coupon payments on January 15 and July 15 of each year. The Wall Street Journal

VladimirAG [237]

Answer:

The invoice price of the bond will be $100,127.88

Explanation:

Bonds are nothing but the debt instrument which a company uses to raise capital from the general public, these bonds can be of both short and long term period.

In the question it is given that bond has a coupon period of 182 days which means the bond is of short term period. Coupon rate of 7% means the bond gives the interest of 7% to its holder semiannually every year on January 15 and July 15.

It is given that the ask price for the bond on January 30 is 100.125 percent on par value of the bond which we are assuming to be $1000, which means the ask price is

$1000 X 100.125 = $100,125 ( ASK PRICE)

now we have to calculate the interest, remember the semiannually payment of interest has already been made on January 15 which means we have to find interest for only 15 days which will be taken out on par value

INTEREST = $1000 x 7% x 15 / 30

= $1000 x .07 x 1/ 2

= $35

INVOICE PRICE = INTEREST X \frac{TOTAL \: NUMBER \: OF \: DAYS}{COUPON \: PERIOD} + Ask price

= $35 X 15 / 182

= $2.884

Now adding this amount in to ask price

$100,125 + $2.884

= $100,127.88 ( INVOICE PRICE)

7 0

2 years ago

After reading the article, select the statements that are correct. Choose one or more: A. The cost-of-living adjustment for 2020

Mama L [17]

Answer:

B. The former program trustee argues that the current inflation measure overcompensates seniors since it ignores the substitution effect.

C. According to advocates for seniors, the 2020 COLA is not enough to compensate for rising healthcare costs.

D. Elizabeth Warren has proposed using a new inflation measure that outpaces the current one used.

Explanation:

The article is, ''<em>Social Security checks to rise modestly amid push to expand benefits '' </em>by<em> Associated Press. </em>

Blahous is a former program trustee who believes that the current inflation adjustment rate at which Social security is increasing is overcompensating seniors because it does not take into account that seniors could be switching to buying cheaper products which is the Substitution effect.

Advocates and the seniors themselves have complained that the 2020 COLA is not enough to meet their current needs especially given the rising cost of healthcare.

Elizabeth Warren and Bernie Sanders both proposed using a new measure for inflation that will adequately compensate the seniors because it outpaces the current one used.

8 0

2 years ago

Berlin Ltd. uses a combined overhead rate of $2.90 per machine hour to apply overhead to products. The rate was developed at an

Rus_ich [418]

Answer:

Berlin Ltd.

1. Overhead spending variance

= $4,530 F

2. Overhead efficiency variance

= $2,262 U

3. Overhead volume variance

= $741 U

Explanation:

a) Data and Calculations:

Combined overhead rate per machine hour = $2.90

Annual expected capacity = 264,000

Machine hours required per unit of product = 2 hours

Total combined expected overhead = $765,600 ($2.90 * 264,000)

Expected fixed overhead = $250,800

Expected variable overhead = $514,800 ($765,600 - $250,800)

Fixed overhead per machine hour = $0.95 ($250,800/264,000)

Variable overhead per machine hour = $1.95 ($514,800/264,000)

November Usage and Production:

Production units = 11,960 units

Standard machine hours = 23,920 (11,960 * 2)

Actual machine hours used = 24,700

Actual variable overhead for the month = $47,100

Variable overhead per machine hour = $1.90688

Standard variable overhead cost = $48,165 ($1.95 * 24,700)

Actual fixed overhead = $20,000

Standard fixed overhead = $23,465 ($0.95 * 24,700)

1. Overhead spending variance = Standard overhead - Actual overhead

= ($2.90 * 24,700 - ($47,100 + $20,000))

= ($71,630 - $67,100

= $4,530 F

2. Overhead efficiency variance = (standard machine hours allowed for production – actual machine hours used) × standard overhead absorption rate per hour

= (23,920 - 24,700) * $2.90

= $2,262 U

3. Overhead volume variance = (Standard machine hours - Actual machine hours) * Standard Fixed Overhead Rate

= (23,920 - 24,700) * $0.95

= $741 U

8 0

1 year ago

A pegged exchange rate means the value of the currency is fixed relative to a reference currency, and then the exchange rate bet

Ganezh [65]

Answer: True

Explanation: When the central monetary authority of a country attaches the value of their country's currency in relation to any other country's currency, then such an arrangement is called pegged exchange rate system.

The reference currency used by the authorities are generally of those countries which have a strong monetary base like US dollar or Euros.

Hence, from the above we can conclude that the given statement is true.

3 0

2 years ago

Which of the following are not legitimate constraints on the dividends a firm will pay to​ shareholders?

Which of the following are not legitimate constraints on the dividends a firm will pay to shareholders?