Basic concepts

Select the correct term for each of the following descriptions.

Descriptions	Terms
This theory contends that a firms dividend policy will not impact either the value of the firm or its cost of capital.	Constant payout ratio
This theory of dividend policy management contends that management uses its dividend payments to send signals regarding the firms future earnings forecasts.	Dividend irrelevance theory
On this date, the firm closes its stock transfer, or stock ownership, book, and the shareholders recorded in the book will receive the firms next declared dividend.	Dividend irrelevance theory
According to this policy, the amount of the firms dividends paid is based on the earnings left over after the funding of the firms optimal capital budget.	Holder-of-record date
If a firm undertakes this activity, the number of shares owned by a individual shareholder will be increased, but value of each share will be decreased proportionally.	Information content hypothesis
If a firms net income varies from year to year, this dividend policy exposes a shareholder to uncertainty regarding the amount of dividends to be received each year.	Optimal dividend policy
If a shareholder opts to participate in this program, their dividends are automatically used to purchase additional shares of the firms outstanding or newly issued stock.	Residual dividend policy
This dividend policy maximizes the price of a firms common stock.	Stock dividend
This type of earnings distribution takes the form of the payment of additional shares of the paying firm, rather than the payment of cash.	Stock repurchase
An earnings distribution activity in which a firms net income is used to increase the treasury stock holding via purchases in the financial markets.	Stock split