Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Dividends and Dividend Preferences

Financial Accounting

12. Stockholders' Equity

Dividends and Dividend Preferences

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Multiple Choice

Which of the following is NOT a way that a firm can increase its dividend?

Issuing more shares of stock

Decreasing capital expenditures

Reducing retained earnings

Increasing net income

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Understand the relationship between dividends and the firm's financial decisions. Dividends are paid out of retained earnings, which are part of the equity section of the balance sheet. They are influenced by net income, retained earnings, and other financial policies.

Analyze the first option: 'Issuing more shares of stock.' Issuing more shares does not directly increase the firm's ability to pay dividends. Instead, it dilutes ownership and may raise additional capital, but this action does not generate income or directly affect retained earnings.

Analyze the second option: 'Decreasing capital expenditures.' By reducing capital expenditures, a firm can conserve cash, which could then be used to pay higher dividends. This is a valid way to increase dividends.

Analyze the third option: 'Reducing retained earnings.' Retained earnings are the accumulated profits of the company. Reducing retained earnings by paying out more dividends is a direct way to increase dividend payments.

Analyze the fourth option: 'Increasing net income.' Higher net income increases the amount of retained earnings, which provides more funds available for dividend payments. This is another valid way to increase dividends.