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Free Questions › CFA › Corporate Issuers
Free CFA Corporate Issuers Practice Questions & Answers
900 exam-style Corporate Issuers questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 361
Which is a typical motivation for a share repurchase?
Select an option first.
Correct answer: C — Distribute excess cash
Explanation: C is a common reason. A usually increases leverage. B is the opposite of a repurchase. D incorrect.
Question 362
A company’s book value per share decreases when:
Select an option first.
Correct answer: A — Shares are repurchased above book value
Explanation: A dilutes book value. B increases book value per share. C increases equity. D neutral.
Question 363
A company’s dividend payout is least sustainable when:
Select an option first.
Correct answer: A — Free cash flow is negative
Explanation: A signals unsustainable payouts. B, C, D support sustainability.
Question 364
A company’s equity value per share increases when:
Select an option first.
Correct answer: A — Shares are repurchased below intrinsic value
Explanation: A is accretive. B, C, D destroy value.
Question 365
Which is a reason to issue preferred shares?
Select an option first.
Correct answer: B — They avoid ownership dilution
Explanation: B is correct: preferred shares usually have no voting rights. A false. C false. D false.
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Question 366
A company’s dividend payout is most sustainable when:
Select an option first.
Correct answer: A — Free cash flow consistently exceeds dividends
Explanation: A supports long‑term payouts. B, C, D signal risk.
Question 367
A company’s EPS decreases after a debt‑financed buyback when:
Select an option first.
Correct answer: B — Earnings yield < after‑tax borrowing cost
Explanation: B means borrowing is too expensive → EPS dilution. A increases EPS. C, D irrelevant.
Question 368
Which is a typical benefit of preferred shares for the issuer?
Select an option first.
Correct answer: B — No voting dilution
Explanation: B is correct: preferred shares usually have no voting rights. A false (dividends expected). C false. D usually false.
Question 369
Which factor increases equity value per share?
Select an option first.
Correct answer: B — Repurchasing shares below intrinsic value
Explanation: B is accretive. A, C, D destroy value.
Question 370
A company’s dividend payout becomes riskier when:
Select an option first.
Correct answer: B — Free cash flow is negative
Explanation: B signals unsustainable payouts. A, C, D support stability.
Question 371
Which is a typical reason for a share repurchase?
Select an option first.
Correct answer: B — Distribute excess cash
Explanation: B is a common motive. A, C, D incorrect.
Question 372
A company’s dividend is least sustainable when:
Select an option first.
Correct answer: A — Free cash flow is negative
Explanation: A signals unsustainable payouts. B, C, D support sustainability.
Question 373
Which situation makes a dividend cut more likely?
Select an option first.
Correct answer: C — Declining operating cash flow
Explanation: C: Weak cash flow threatens payouts. A, B, D support dividends.
Question 374
Which factor increases the sustainability of a share repurchase program?
Select an option first.
Correct answer: A — Funding repurchases with recurring free cash flow
Explanation: A: Recurring FCF is sustainable. B, C, D are risky.
Question 375
A company’s book value per share may rise even if equity falls when:
Select an option first.
Correct answer: A — Shares are repurchased below book value
Explanation: A increases book value per share. B, C, D destroy value.
Question 376
Which factor increases the sustainability of dividends?
Select an option first.
Correct answer: C — Predictable earnings
Explanation: C supports stable dividends. A, B, D reduce sustainability.
Question 377
Which factor most likely increases the sustainability of a high payout ratio?
Select an option first.
Correct answer: B — Predictable free cash flow
Explanation: B: Stable FCF supports high payouts. A, C, D undermine sustainability.
Question 378
A company’s book value per share may rise even if total equity falls when:
Select an option first.
Correct answer: A — Shares are repurchased below book value
Explanation: A increases book value per share. B, C, D destroy value.
Question 379
Which factor increases the sustainability of dividends?
Select an option first.
Correct answer: B — Predictable earnings
Explanation: B supports stable dividends. A, C, D reduce sustainability.
Question 380
A company’s book value per share may fall even if equity rises when:
Select an option first.
Correct answer: A — New shares are issued at a discount
Explanation: A dilutes book value per share. B, C, D do not.
Question 381
A firm with volatile cash flows is considering a stable dividend policy. Which risk increases?
Select an option first.
Correct answer: B — Higher reliance on external financing
Explanation: B: Stable dividends + volatile cash → need external funding. A, C, D incorrect.
Question 382
A company’s pro‑forma EPS after an acquisition is lower than standalone EPS. Which factor most likely caused the dilution?
Select an option first.
Correct answer: B — High purchase price relative to target earnings
Explanation: B: Overpaying → EPS dilution. A, C, D would help accretion.
Question 383
A firm’s dividend yield spikes sharply while fundamentals deteriorate. Which interpretation is most accurate?
Select an option first.
Correct answer: B — The market expects a dividend cut
Explanation: B: High yield + weak fundamentals → expected cut. A, C, D unlikely.
Question 384
A company’s dividend payout becomes more sustainable when:
Select an option first.
Correct answer: A — Earnings become more predictable
Explanation: A supports stable payouts. B, C, D reduce sustainability.
Question 385
A firm’s pro‑forma net income rises after an acquisition, but pro‑forma EPS falls. Which factor explains this?
Select an option first.
Correct answer: B — Large share issuance
Explanation: B: Share count dilution can outweigh income growth. A, C, D would help EPS.
Question 386
A firm with volatile cash flows adopts a stable dividend policy. Which consequence is most likely?
Select an option first.
Correct answer: B — Higher probability of borrowing to fund dividends
Explanation: B: Stable dividends + volatile cash → need borrowing. A, C, D incorrect.
Question 387
A firm’s dividend yield spikes sharply while fundamentals weaken. Which interpretation is most accurate?
Select an option first.
Correct answer: B — The market expects a dividend cut
Explanation: B: High yield + weak fundamentals → expected cut. A, C, D unlikely.
Question 388
A firm’s pro‑forma net income rises after an acquisition, but pro‑forma EPS falls. Which factor explains this?
Select an option first.
Correct answer: A — Large share issuance
Explanation: A: Share count dilution can outweigh income growth. B, C, D would help EPS.
Question 389
A company estimates ERP using a forward‑looking model. The estimate rises even though inflation expectations fall. Which factor explains this?
Select an option first.
Correct answer: A — Higher expected real earnings growth
Explanation: A: Higher real growth → higher ERP. B, C, D reduce ERP.
Question 390
A firm with highly seasonal cash flows adopts a constant dividend policy. Which consequence is most likely?
Select an option first.
Correct answer: B — Higher need for liquidity buffers
Explanation: B: Constant dividends + seasonal cash → need cash buffers. A, C, D incorrect.
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