Multiple Choice
Which two types of receivables are most commonly found on a company's balance sheet?
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7. Receivables and Investments
Types of Receivables
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Dividends from a stock insurance company are normally sent to which of the following parties?
A
The employees of the insurance company
B
The policyholders of the insurance company
C
The creditors of the insurance company
D
The stockholders of the insurance company
Verified step by step guidance1
Understand the concept of dividends: Dividends are payments made by a corporation to its shareholders, typically as a distribution of profits.
Identify the type of company mentioned: The problem specifies a 'stock insurance company,' which is a company owned by stockholders (shareholders).
Clarify the role of stockholders: Stockholders are individuals or entities that own shares in the company. They are entitled to dividends as a return on their investment.
Eliminate incorrect options: Employees, policyholders, and creditors are not entitled to dividends unless they also own stock in the company. Their relationship with the company is different (e.g., employees receive wages, policyholders receive insurance benefits, and creditors are repaid loans).
Conclude that dividends from a stock insurance company are sent to the stockholders, as they are the rightful recipients of profit distributions.
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