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

Given the statements below, choose the most accurate definition of dividends.

Dividends are payments made by a corporation to its creditors as interest on loans.

Dividends are distributions of a corporation's earnings to its shareholders, usually in the form of cash or additional shares.

Dividends are the profits retained by a corporation for reinvestment in the business.

Dividends are mandatory annual payments required by law for all corporations.

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Verified step by step guidance

Understand the concept of dividends: Dividends represent a portion of a corporation's earnings that are distributed to its shareholders. They are typically paid in cash or additional shares, and they are not mandatory payments required by law.

Analyze the incorrect options: The statement that dividends are payments made to creditors as interest on loans is incorrect because interest payments are not dividends; they are obligations related to debt financing.

Evaluate the option about retained profits: The statement that dividends are profits retained by a corporation for reinvestment is incorrect because retained earnings are the portion of profits kept within the company, not distributed to shareholders.

Consider the option about mandatory payments: The statement that dividends are mandatory annual payments required by law is incorrect because corporations are not legally obligated to pay dividends; it is a decision made by the board of directors.

Select the correct definition: The most accurate definition is that dividends are distributions of a corporation's earnings to its shareholders, usually in the form of cash or additional shares.