1. Which one of the following is a false statement about stock split?

A. Stock splits increase investor's wealth

B. The primary motivation is to reduce the price of shares to bring it into an optimal trading range

C. A stock split means a corporate action in which a company divides its existing shares into multiple shares

2. Which one of the following is a true statement?

A. Common stocks have higher priority claim than debts.

B. Common dividends cannot be paid if preferred dividends are in arrears on cumulative preferred stock.

C. Preferred stockholders always have voting power.

D. Investors can sue managers for nonpayment of dividends.

E. Stock splits increase investor’s wealth

3. Which one of the following favors a low dividend policy?

A. A majority of the shareholders are institutional investors (corporations)

B. A majority of the shareholders are tax-exempt investors, such as pension funds

C. A majority of the shareholders have a high tax rate.

D. A majority of the shareholders are retired people