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 one of the following combinations will always result in an increased dividend yield?

A decrease in dividends per share and an increase in market price per share

An increase in dividends per share and a decrease in market price per share

A decrease in both dividends per share and market price per share by the same percentage

An increase in both dividends per share and market price per share by the same percentage

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Verified step by step guidance

Step 1: Understand the concept of dividend yield. Dividend yield is calculated using the formula:

\frac{D}{P}

, where D represents dividends per share and P represents market price per share.

Step 2: Analyze the impact of each combination on the dividend yield. For example, if dividends per share (D) increase and market price per share (P) decreases, the numerator of the formula increases while the denominator decreases, leading to a higher dividend yield.

Step 3: Evaluate the first option: A decrease in dividends per share and an increase in market price per share. This combination decreases the numerator (D) and increases the denominator (P), resulting in a lower dividend yield.

Step 4: Evaluate the second option: An increase in dividends per share and a decrease in market price per share. This combination increases the numerator (D) and decreases the denominator (P), which will always result in an increased dividend yield.

Step 5: Evaluate the remaining options to confirm their impact. For example, a decrease in both dividends per share and market price per share by the same percentage will leave the dividend yield unchanged, and an increase in both dividends per share and market price per share by the same percentage will also leave the dividend yield unchanged.