1. What are the advantages of a stock split or a dividend over a cash dividend?
2. Why will companies with a history of paying dividends continue to issue a dividend even if the company is losing money?
3. Let's evaluate contribution margin (profit minus variable cost per unit) versus gross profit. If the contribution margin per unit is $1 (this is a positive number) whereas the gross margin per product is ($1) per unit (this is a negative number)...would you continue to produce this product? Why or Why not?
4. In your own words, define operating leverage. Provide an example whereas being 'highly leveraged' might be considered a good thing.
5. What is the difference between a stock dividend and a stock split? As a stockholder, would you prefer to see your company declare a 200% stock dividend or a four-for-one split? Be sure to support your analysis with concepts introduced during this week's readings.