Why Might a Firm Announce a "Reverse Stock Dividend

question 71

Multiple Choice

Why might a firm announce a "reverse stock dividend"?

• A) This only occurs when the firm wants its price to increase, perhaps due to listing requirements.
• B) This is impossible.
• C) This only occurs when the firm is in financial hardship and the management team wants to execute a leveraged buyout.
• D) None of the options are reasons for a reverse stock dividend.

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Definitions:

Variable Manufacturing Overhead

Indirect manufacturing costs that fluctuate with production volume, such as utility costs for running production equipment.

Fixed Manufacturing Overhead

The total of all production costs that do not change with the level of output, including salaries, rent, and insurance.

Depreciation

The allocation of the cost of an asset over its useful life, reflecting the loss in value over time.

Master Budget

An inclusive financial planning document that combines all of a company's individual budgets and plans for a specific period.