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Business Finance MCQ - Business Finance Section 2

36 Payout Ratio computed by

The payout ratio is commonly calculated in one of two ways, either on a total basis, in which case the ratio is calculated by dividing the total amount of dividends paid out by the company's total net income, or on a per-share basis where the formula used is dividends per share divided by earnings per share

37 Which formula may be used for cost of Preference Share Capital?

38 What should be for the cost of retained earnings?

39 Which of these is an appropriate measure of individual share risk (i.e. the risk of a single share held as part of a portfolio)?

40 Which is the determinants of Capital Structure?

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Question:

The corporate finance theory implies that

A. Owners have the primary interest in the firm
B. The firm should accept only those investment which generates a positive net present value
C. The firm capital structure and dividend decisions are irrelevant as they are solely guided by efficient capital markets and management has no control over them
D. All of the above

Correct answer: D

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