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 investors would likely prefer a cash dividend over a stock dividend?

An investor who wants to increase their ownership percentage in the company

An investor focused on long-term capital appreciation

An investor who prefers to defer taxes on dividend income

An investor seeking regular income from their investments

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Verified step by step guidance

Understand the difference between cash dividends and stock dividends: A cash dividend is a direct payment made to shareholders, providing immediate income, while a stock dividend issues additional shares, increasing ownership but not providing immediate cash.

Analyze the preferences of each type of investor mentioned in the problem: Investors focused on ownership percentage or long-term capital appreciation may prefer stock dividends as they increase equity without immediate taxation.

Consider the tax implications: Stock dividends allow investors to defer taxes, as they are not taxed until the shares are sold, whereas cash dividends are taxed in the year they are received.

Identify the investor seeking regular income: Cash dividends provide immediate income, making them suitable for investors who rely on their investments for regular cash flow.

Conclude that the investor seeking regular income from their investments would prefer a cash dividend, as it aligns with their financial goals and needs.