Posted by In exam questions and answers wording matters! Sometimes you need to get tricked to have that “Aha Moment”. How do you recognize the trick in the Answers selection?
Hi, everybody. Andre here in the Coach’s Hangout, a spot where our students can come and leave their requests, knowing this is where our study coaches hang out virtually and may leave some helpful content. In last week’s blog/video, I taught a mini-lesson on the Statement of Cash Flows. I encourage you to check it out as it may help you earn a few potential marks on exam day. Now, in that video, I said something along the lines of dividends, which are obviously paid in cash. Well, one of our viewers left a comment on the video asking, “Well, what about stock dividends?” Touché, and keep up the great work, and thank you for giving me this idea on this follow-up blog/video called, Wording Matters. When it comes to doing practice questions, sometimes you want to get tricked. You need to get tricked. It’s my Jack Nicholson impression, A Few Good Men.
You want me on that wall? You need me on that wall? No? Okay. Well, I tried, but seriously, sometimes you need to get tricked in order to have that aha moment. Now, to make that happen, we will sometimes design an intentionally tricky question, or play certain questions back-to-back to highlight a subtle point that you may have missed while reading the course content.
Consider these two questions.
Question number one. If, a company pays a dividend, will a dividend impact its cash flow? Question number two. If a company pays a stock dividend, will the dividend impact its cash flow? It may surprise you to learn that the answer to question one is yes, but the answer to question number two is no. Like I said, wording matters. In question number one, it says the company pays a dividend. For exam purposes, it’s safe to assume the dividend is paid in cash because most dividends are. Now, with question number two, it says the company pays a stock dividend, which is very specific and meaningful wording. A stock dividend is a dividend where, in lieu of receiving cash, the shareholders are given additional stock or shares. For example, in lieu of a cash dividend of 25 cents per share a specific fraction of an additional share may be given. To really put a bow on this concept. A company that is experiencing cash flow issues may elect to take this approach and pay a stock dividend, which doesn’t impact its cash flow rather than skip the dividend entirely.
Like I said, it’s okay to get tricked when studying as long as you learn from it. Make sure to keep reading those answer keys. This was a pretty short video with some really bad acting. So I figure I’ll leave you with one more thing before I let you go. Does this sound like you? Sometimes I make an assumption and I get the right answer. And other times I make an assumption and I get burned by it. For some insight on how examiners think and how to make effective assumptions, I’ll put a link in the description below to a video where I cover that very topic. Thanks for dropping by the Coach’s Hangout, and if you want to see more content like this, you know the drill. Smash that like button, subscribe, and hit that notification bell, so you know each time we post a new video or go live.
