Trends in corporate payout policies CFA Flashcards - Medical Study Cards
Master Trends in corporate payout policies with Oncourse flashcards. These spaced repetition flashcards are designed for medical students preparing for NEET PG, USMLE Step 1, USMLE Step 2, MBBS exams, and other medical licensing examinations.
Trends in corporate payout policies Flashcard Deck - 10 Cards
Flashcard 1: Dividend coverage ratio. FCFE ratio =
Answer: \= FCFE / (dividends + share repurchases)\
ratio \< 1 considered unsustainable
Flashcard 2: Agency costs affect on company's dividend payout policy. Between shareholders & bondholders?
Answer: conflict resolved via provisions in the bond identure (may include restrictions on dividend payment, maintenance of certain BS ratios, etc)
Flashcard 3: Current: common stock (dividends)
Answer: historical
Flashcard 4: Tax payout adjustment model
Answer: expected increase in dividends = [(expected earnings\*target payout ratio) - previous dividends]\*adjustment factor
adjustment factor = 1 / # of years which adjustment will take place
Flashcard 5: after tax cost of funds
Answer: \= (after-tax cost of borrowing)(shares repurchased)(buyback share price)
Flashcard 6: number of treasury shares =
Answer: \= assumed proceeds / average share price during reporting period
Flashcard 7: Share repurchase methods
Answer: - open market transactions
- fixed-price tender offer: buy fixed # of shares at premium (fastest process)
- Dutch auction: range of prices, identify minimum clearing price, the price of last offer accepted (highest accepted bid price) is price paid
- direct negotiation: purchase from major shareholder, usually at discount
Flashcard 8: Tax aversion theory?
Answer: investors prefer not to receive dividends due to higher tax rates than capital gains
Flashcard 9: 5 types of dividends
Answer: 1. regular cash dividends
2. special dividends
3. liquidating dividend: paid when part or all of firm is sold or when dividends in excess of cumulative retained earnings are paid
4. stock dividend: more shares, increase stock's float
5. stock splits: like stock dividends but larger in size
Flashcard 10: Sustainable growth rate. SGR =
Answer: \= b\*ROE\
b: retention rate
Keywords: Trends in corporate payout policies flashcards, medical flashcards, NEET PG preparation, USMLE Step 1 flashcards, Anki alternative, spaced repetition medical, Oncourse flashcards