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 is true about dividend growth patterns?

Dividend growth patterns are always unpredictable and never follow a consistent trend.

Dividends can only decrease or remain the same; they cannot increase.

All companies pay dividends that remain unchanged over time.

Some companies increase their dividends at a constant rate each year, which is known as the constant growth model.

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Verified step by step guidance

Understand the concept of dividend growth patterns: Dividends are payments made by a company to its shareholders, typically derived from profits. The growth pattern of dividends can vary depending on the company's financial strategy and performance.

Learn about the constant growth model: This model assumes that a company increases its dividends at a constant rate each year. It is often used in financial valuation methods, such as the Gordon Growth Model, to estimate the value of a stock.

Recognize that not all companies follow the constant growth model: Some companies may have unpredictable dividend patterns due to fluctuating profits or changes in their financial strategies. Others may choose not to pay dividends at all.

Understand the implications of the constant growth model: Companies that consistently increase dividends at a constant rate are often considered stable and reliable investments. This model is particularly useful for valuing mature companies with predictable growth.

Clarify misconceptions: Dividends can increase, decrease, or remain unchanged depending on the company's financial health and strategy. The statement 'Some companies increase their dividends at a constant rate each year' is correct and aligns with the constant growth model.