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 best describes a dividend?

A liability created when a company borrows money from a bank.

A distribution of a corporation's earnings to its shareholders.

An expense incurred by a company in the process of generating revenue.

A payment made by customers to purchase company stock.

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Verified step by step guidance

Step 1: Understand the concept of a dividend. A dividend is a distribution of a corporation's earnings to its shareholders, typically in the form of cash or additional stock. It represents a return on investment for shareholders.

Step 2: Analyze the options provided in the question. Each option describes a different financial concept, and you need to identify which one aligns with the definition of a dividend.

Step 3: Eliminate incorrect options. For example, 'A liability created when a company borrows money from a bank' refers to debt, not a dividend. Similarly, 'An expense incurred by a company in the process of generating revenue' refers to operating expenses, not dividends. Lastly, 'A payment made by customers to purchase company stock' refers to stock purchases, not dividends.

Step 4: Focus on the correct option. 'A distribution of a corporation's earnings to its shareholders' matches the definition of a dividend, as it involves sharing profits with shareholders.

Step 5: Confirm your understanding by reviewing the concept of dividends in financial accounting. Dividends are typically declared by the company's board of directors and are paid out of retained earnings, reflecting the company's profitability and financial health.