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 statements about dividends is correct?

Dividends represent the corporation's retained earnings reinvested in the business.

Dividends are mandatory payments required by law for all corporations.

Dividends are payments made to creditors of a corporation.

Dividends are resources paid to the owners (shareholders) of a corporation.

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Verified step by step guidance

Understand the concept of dividends: Dividends are distributions of a corporation's earnings to its shareholders, typically in the form of cash or additional shares. They represent a return on investment to the owners of the corporation.

Clarify the incorrect options: Dividends are not retained earnings reinvested in the business. Retained earnings are profits kept within the company for growth or other purposes, not distributed to shareholders.

Explain why dividends are not mandatory: Dividends are not required by law. Corporations decide whether to pay dividends based on their financial health, profitability, and strategic goals.

Distinguish dividends from payments to creditors: Dividends are paid to shareholders, not creditors. Payments to creditors are obligations such as interest or principal repayment on loans, which are separate from dividends.

Confirm the correct statement: Dividends are resources paid to the owners (shareholders) of a corporation, as they represent a share of the company's profits distributed to its investors.