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

Dividends received by shareholders can be expressed in which of the following ways?

As a liability to the shareholders

As a reduction in the number of shares held

As a cash payment per share

As an increase in the par value of shares

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Verified step by step guidance

Understand the concept of dividends: Dividends are payments made by a corporation to its shareholders, typically as a distribution of profits. They are not liabilities to shareholders, nor do they affect the number of shares held or the par value of shares.

Recognize the common forms of dividend payments: Dividends are usually paid in cash (cash dividends) or additional shares (stock dividends). In this case, the problem specifies cash payment per share.

Clarify why dividends are not liabilities: Once declared, dividends become a liability for the company until paid, but they are not considered a liability to shareholders. Shareholders receive dividends as income, not as a debt owed to them.

Explain why dividends do not reduce the number of shares held: Dividends do not alter the ownership structure or the number of shares held by shareholders. They are a distribution of profits, not a change in equity structure.

Conclude with the correct answer: Dividends received by shareholders are expressed as a cash payment per share, which aligns with the definition and common practice of dividend distribution.