Question

4. In order to receive the special dividend that the firm announced on July 20, 2020, what is the latest date on which you have to purchase the firm’s stock, which is publicly traded in the US markets only? A) End of Day of the Declaration date B) The day before the Ex-dividend date C) End of Day of the Record date D) End of Day of the Ex-dividend date E) The day before the Record date

9. Which one of these statements is correct?

A) A firm's cash cycle generally decreases when it switches from a cash to a credit policy, all else equal.

B) A firm may have to increase its long-term borrowing if it decides to grant credit to its customers.

C) Most customers will forgo the discount and pay at the end of the credit period.

D) Only the cost of default should be considered before granting credit. E) Total revenues generally decrease if both the quantity sold and the price per unit increase when credit is granted.

10. If a company’s account payable period is longer than its operating cycle, then which of the following is most likely to be true:

A) the company can avoid paying corporate taxes on earnings retained as cash.

B) the company’s future cash flows will increase at a steady rate.

C) the company’s cash cycle is negative

D) the company pays for its inventory before it receives payments for its sales E) the company’s cash cycle is longer than its operating cycle.

Answer 1

4. In order to receive the special dividend that the firm announced on July 20, 2020, what is the latest date on which you have to purchase the firm’s stock, which is publicly traded in the US markets only?

Option B is correct

The stock must be purchased before the ex-dividend date in order to receive the dividends.

Option D is incorrect because if we purchase the stock on the ex-dividend date or after the ex-dividend date, we are not eligible for the dividends.

Options C and E are incorrect because the record date comes after the ex-dividend date and stocks purchased on or after the ex-dividend date are not eligible for dividends.

Option A is incorrect because we can purchase the stock after the declaration date and still be eligible for dividends if we purchase before the ex-dividend date.

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